China’s globe-spanning infrastructure program is shrinking. The rhetoric at last week’s second Belt and Road Forum was less triumphalist — and new plans for roads, pipelines, bridges and rail lines more modest — than at the first. Unfortunately for the US and its allies, a downsized program could pose more, not less, of a competitive threat to the West.
Thus far, most worries about the Belt and Road Initiative have focused on its size and weak standards. The sheer volume of the supposedly multitrillion-dollar initiative looked impossible to match. Meanwhile, a corrosive combination of debt, corruption and privileged access for Chinese companies threatened to lure or coerce countries away from the US’ orbit and into China’s.
However, in many ways, this model always contained the seeds of its own failure. The emphasis on speed and scale came at the expense of sustainability, both economically and politically. In most countries, China failed to build a broader consensus for its investments beyond whatever government happened to be in office.
In a series of elections from Malaysia to the Maldives, opposition parties have sailed into power by railing against Chinese mega-projects that looked to be lining the pockets of politicians, instead of boosting the economy. Investments in countries such as Pakistan had already been pared back as rising debt levels limited their ability to take on new projects.
By spurring fears in the US, Japan, India and Europe, the Belt and Road Initiative also provoked competition. With the exception of Japan, whose overseas investments have by some measures exceeded China’s in the past few years, this has not cost much money.
India has provided financing to help shore up the new Maldivian government and the US has extended legal and political help to governments negotiating major contracts, such as Myanmar. However, it has so far proved relatively easy for China’s competitors to rely on the Belt and Road Initiative to catalyze its own political pushback.
There are limits to Beijing’s ability to fix this. Some of the Belt and Road Initiative’s flaws are endemic to the way that the Chinese economic and political system works: For example, Beijing’s deep sensitivity to political embarrassment around the scheme is only increasing its lack of transparency.
Nor is China willing to make the initiative genuinely multilateral, which would slow it down and erode any bilateral leverage.
However, leaders in Beijing can and will adjust. They have already shown striking willingness to renegotiate contracts, with Malaysia’s US$16 billion East Coast Rail Link — now about 30 percent cheaper — being only the largest example.
Newly elected governments have found Chinese counterparts relatively flexible on rescheduling loans, revisiting project costs or shifting the focus of the two sides’ economic cooperation.
Even the flagship China-Pakistan Economic Corridor is set to level out at about a third of the scale that was once touted.
This leaner version of the Belt and Road Initiative will potentially be far more potent. China would still be able to deploy its many advantages in the new scheme: its capable infrastructure firms, large-scale subsidies for its major companies, speedy decisionmaking, increasingly cutting-edge technology and willingness to finance non-bankable projects that fit broader strategic goals.
At the same time, a more measured approach, better attuned to political and economic risk and more responsive to local demands, would give China greater scope to entrench its presence in the economic sectors that matter.
Most important of these would be digital infrastructure projects, where China’s advances — from fiber-optic cables to telecom networks — would likely do more to affect US security and commercial interests than any number of roads, railways or dams.
China’s 5G capabilities are proving attractive even to key US allies, posing risks for US intelligence-sharing and military mobilization. Chinese surveillance technologies are being launched across the developing world, promising to spread China’s authoritarian capabilities.
From data access to standard setting, the so-called Digital Silk Road would also augment China’s edge in the industries of the future — and would receive a warm welcome from countries looking to benefit from Beijing’s subsidized prices and fast rollouts.
A rebalancing away from the most toxic aspects of the Belt and Road Initiative would certainly limit China’s ability to ensnare smaller countries in debt and gain access to such strategic assets, but it would also force the US to compete against China’s underlying strengths and most compelling appeals, rather than on the Belt and Road Initiative’s most obvious — and fixable — flaws.
Andrew Small is a senior transatlantic fellow on the Asia program at the US’ German Marshall Fund.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
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