11 October 2020, NIICE Commentary 6128
Malavika Nandan
China’s Belt and Road Initiative (BRI) is a global development project which is revival of the ancient silk road. It is Chinese President Xi Jinping’s ambitious projects, which aims to strengthen and assert China’s foreign policy with infrastructural developments in the neighbouring countries with objectives such as the creation of a large unified market, taking into account both foreign and domestic market, help in cultural exchange and connection and involve the countries to form bonds of trust as well as create an innovative environment with capital, technology and talent transfers. BRI, first introduced in 2013 aims to span over 78 countries and there are two phases to it; on land, it aims to improve connectivity and economic cooperation of Eurasia by spanning over six economic corridors (The Silk Road Economic Belt) and the second phase, 21st century maritime silk road is sea based and connects China to Mediterranean, Africa, Central Asia and South east Asia.
While it is argued that this initiative is Beijing’s method to gain political leverage over other countries, the economic concerns of China as an objective cannot be disregarded. Few of these include an effort to decrease the regional disparity and to bring in development to the hinterlands. Along with it, it is a method to utilise the country’s excess capacity. This does not indicate dumping but rather the supply and establishment of the factories for the development of the countries that need it. This article aims to explore a brief introduction into the various geostrategic and geo-economic aspects that are associated with BRI. BRI as a global strategy aims at improving relations in areas such as policy, finance, trade and infrastructure.
Peripheral Diplomacy – Geostrategy
Xi Jinping’s administration policy of “new normal” focused on having a stable growth rate along with various structural changes rather than focusing on a high growth rate. As a foreign policy, BRI was brought about for “Peripheral diplomacy”. Peripheral diplomacy would bring about “national rejuvenation” by maintaining good relations with China’s neighbours with interests for regional economic cooperation as well as integration and the strategy of constructing the infrastructure for connectivity. Many characteristics prove the fact the BRI is mainly led by geopolitical strategies, such as the China-Pakistan Economic corridor (CPEC). This is at a stretch of 3000 kms and the China-Pakistan government decided on building roads, optical fiber networks, railways from Kashgar, Xinjiang to Gwadar port, Pakistan. The CPEC will help to link China with half of the population of the world. If the Gwadar port is developed, China’s marine warships as well as trade ships can avoid the Malacca strait which makes the whole process inexpensive and the path is shortest to world markets. It benefits Beijing to keep an eye on the advancements happening on Indian and American activities in Indian Ocean. Pakistan is also benefitted with a much needed infrastructure and an improved alliance with China. There is also a tint of military operation benefits that CPEC provides. Gwadar port can be developed to provide naval footprint of attack submarines and to establish foothold of Beijing in the Indian Ocean.
Xi Jinping visited US and termed it as “new model of major power relations” instead of G2, but the relation is quite strained. BRI can, in fact, be described as a strategic method chosen by China in opposition to the US pivot to Asia and TPP (Trans Pacific Partnership). It was almost a way of conveying about its unipolar possession and dominance of Asia and the military cooperation were strengthened with allied nations of Japan- Australia. China believes that it is a strategy to contain China and have been very repulsive towards the same. If BRI initiative is recognized by US, it helps in a win-win situation of improving economic growth, limiting infrastructural loops and improving trade flows. The withdrawal of US from the TPP also helps to sell the Chinese idea much more effectively.
Geoeconomics
The economic aspects of BRI has two main objectives: firstly, it is a chance by which they can utilise economic integration to assert its regional leadership. Here, China would be the centre of innovation and development in the regional production chain. The next, would concern with three concerns: making enough use of the excess capacity, upgrading Chinese industries and encouraging regional economic development while maintaining good relations with its neighbours.
It is likely that Beijing will mostly focus first on the domestic aspects of BRI as it is easier to implement when the activities are in its own jurisdiction. The regional disparity well exists in inland countries and coastal regions. State subsidies implemented heavily in the western provinces resulted in high concentration of state-owned enterprises and low private investments. The main objective of BRI is to integrate them into regional economies rather than showering them with government money.
China has already become a world market but the comparative advantage that it possesses in labour, manufacturing has taken a hit. Therefore, improving its industry and producing higher end products is one of its main development goals. BRI aims to facilitate the export of these goods, and hence, help in the upgradation of Chinese markets as the countries and emerging markets associated with BRI will be more willing to accept these goods than developed markets of Australia or Europe.
Excess capacity leads to wastage of resources, surplus cost and also makes the country vulnerable. BRI is less about exporting these excess capacities but more about providing these production facilities to other countries. The equipment which produce excess of steel and other products can be moved through direct foreign investments to Association of Southeast Asian Nations (ASEAN) countries in order to improve their infrastructure.
The US believes that the financing policies of China will later compromise the sovereignty of the nations. Various policies have been taken to educate the BRI countries about debt trap and the structuring of the financing policies and debt structure need to be taken care of in a manner that finally they do not fall into a debt trap or have to compromise their sovereignty which might prove detrimental to national security.
The BRI initiative helps in creating a well-integrated economic area of both soft and hard infrastructure. The hard infrastructures are rails and roads while soft infrastructure include trade agreements. The initiative will also help to reduce time and the trade costs by 2.2 percent. The China-ASEAN Free Trade Agreement (FTA) and the China-Eurasian Economic Union (EAEU) FTA will help in effectively taking care of maritime and overland BRI routes.
China, through this project, uses geopolitical strategy to make its neighbouring countries closer to Beijing. Secondly, it plans to improve its manufacturing abilities and making use of the technologies. However, the question is whether the neighbouring countries are willing to make use of the excess capacity that China possess due to lack of trust as well as growing tensions. China’s ability to fund the projects in the long term and their ability to manage the project outside borders of China will determine how successful the project is. China is, hence, on a mission to become the true superpower and to prove that BRI is an opportunity rather than a threat through various policies and methods.
