The hegemony of the United States has been far too prominent since the end of the Cold War and the disintegration of the USSR. Capitalism has taken over world economics, and “the west” is seen as the ideal for the globe. If there is any country that can dare challenge or potentially prove to be a threat to this hegemony is surely the People’s Republic of China. The world’s most populated country is not only a production capital but also the most influential power in the east where almost 60% of all the people in the world reside. The Belt and Road Initiative is one such plan, that could shake the western world and put China’s name right next to the US. 

WHAT IS THE BELT AND ROAD INITIATIVE?

Launched in 2013, by the President of China, Xi Jinping, as One Belt One Road (OBOR), now called the Belt and Road Initiative, BRI is probably the world’s most ambitious infrastructure plan to date. According to the official website of BRI, it is defined as a transcontinental long-term policy and investment program which aims at infrastructure development and acceleration of the economic integration of countries along the route of the historic Silk Road. 

The Belt and Road Initiative also described as the “21st century Silk Road” aims to be a global initiative but since the major infrastructure developments will be taking place around the old Silk Road, it puts a spotlight on countries lying in Asia, Eastern Africa, Eastern Europe, and the Middle East. Besides being a road initiative, it also comprises the development of maritime collaboration, developing a maritime “road” of shipping lanes. The participating countries are major emerging markets and together contribute to more than a third of the world’s GDP. 

Although there are different estimates as to how much money is being spent, the Belt and Road Initiative could cost more than $ 1 trillion. China has invested over $210 billion, making it the highest investor in Asia. But besides the overall investment, it gives contracts and employments to multiple Chinese construction firms, bringing in more money to the economy. According to The Guardian, these construction companies have secured more than a total of $340 billion to date. However, the neighbouring countries are facing setbacks as a majority of the project is being handled by China itself and its banks are the major investors.

POLITICAL IMPACT

The BRI is more than just an economic investment. China is looking at a geopolitical staggering of power by the initiative. With more than 2/3rd of the world’s population being impacted by the Belt and Road initiative and its developments; the subtle spread of Chinese soft power is inevitable. 

President Xi has always promoted a prospect for a more assertive China, especially now more than ever. With the advent of the trade war with the United States, the pandemic, and border tensions with India. The policy and people-to-people vision that the President has for the BRI are a reflection of China’s plans to compete with the western ideology. 

The impact is not limited to the continent of Asia only, with ports and maritime links extending to Europe via Africa and the Middle East, aiming at a hefty spread of economic, political, and diplomatic relations. Investments in African countries have previously resulted in China gaining their support to get positions in the United Nations. 

Its relations with Europe as well have seen positive growth, with some of the major countries like Germany, France, and the United Kingdom encouraging its creation of the Asian Infrastructure Investment Bank, even though the US objected to it. Closer home, China’s investments in Afghanistan led to Kabul backing it in the South China Sea controversy. 

But this geopolitical impact is being created with the privilege of a powerful economy. many critics are worried that China might use “debt-trap diplomacy” to extract strategic concessions. A 2018 Centre for Global Development report noted that 8 BRI countries are vulnerable to a debt crisis. Many have chosen to stay silent on disputes like the South China Sea and allegations of it building concentration camps for the minority of Muslims amid various cases of human rights violations coming to light in international news. 

ECONOMIC IMPACT

China’s share in global FDI has increased manifold since the launch of the Belt and Road Initiative in 2013. Chinese FDI increased to nearly $180 billion in 2017 from a comparatively meagre $10 billion in 2005. It has had a stake of 12% in global cross-border mergers and acquisitions and around 9% of greenfield FDI projects between 2013 and 2018. The construction industry also saw a boom as the cost of the annual contracts went up to more than $100 billion in 2017. 

However, the American Enterprise Institute’s China Global Investment tracker showed that China invested a total of $655 billion outside of BRI countries as compared to the $420 billion it invested in the participating countries. Therefore, Chinese investments have been more in the countries that are outside the realm of the BRI, most of which are developed and thus tend to have larger markets. 

CHALLENGES TO THE BRI 

China’s success in the Belt and Road Initiative is heavily dependent on its ability to move beyond a bilateral framework and come up with a truly multilateral vision for project participation and multilateral agreements. On monetary grounds are well, a budding opposition can be seen. The high cost of the BRI has pushed some countries to take loans as the projects are being built using low-interest loans in place of aid grants. Many investments are not transparent and use Chinese firms as a link in between. 

The BRI also gives China leverage over smaller and poorer countries and might lead to economic imperialism. Another cause for worry is that China may start expanding its military presence along with increased commercial presence around the world. For instance, China has already established its first overseas military base in Djibouti. 

However, the Belt and Road Initiative is enshrined in the Communist Party’s constitution in China and is likely to continue despite all challenges and concerns. 

SOURCES

Belt and road official website:

https://www.beltroad-initiative.com/belt-and-road/

Article on belt and road initiative by world bank dated March 29, 2018

https://documents.worldbank.org/en/publication/documents-reports/documentdetail/836301554729486900/the-belt-and-road-initiative-reshaping-economic-geography-in-central-asia

Article by observer research foundation dated Feb 24, 2021

https://www.oecd.org/finance/Chinas-Belt-and-Road-Initiative-in-the-global-trade-investment-and-finance-landscape.pdf

Article by Andrew and James dated January 28, 2020

Article by Keith Johnson dated June 1, 2016

Article by Daniel Wagner dated Sept 6, 2020

 

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