As Asian dilemma
Does partnering with China’s Belt and Road Initiative create unhealthy relationship patterns?
Consult people in Sri Lanka about their views on the world and you’ll soon pick up their mixed feelings about China. Some maintain that China is a loyal friend and they express gratitude for its lavish investments. But many others perceive that the relationship is leveraged on a massive economic imbalance. They warn that a price must be paid.
Now, with Sri Lanka in a deep political crisis, there is also understandable concern among the Chinese. Has the money which has been spent in Sri Lanka disappeared into a black hole? Who can they talk to about how to set things straight?
On both sides, people are asking: who needs who and what kind of relationship will work? Such questions are also pertinent in other countries in Asia, including Pakistan, Nepal and the Philippines.
President Xi Jinping launched China’s much heralded Belt and Road Initiative in 2013. Sri Lanka looked like an ideal early partner and readily accepted Chinese money in exchange for much-needed investment in its infrastructure, including ports in Colombo and Hambantota.
What many people in Sri Lanka didnot realise at the start of the process was that collateral would be expected in exchange for the Chinese money. In waiver of a return on loans, the Chinese took control of the ports. This created a domestic political rift which has partly caused the ongoing power struggle in Colombo.
Sri Lanka now owes more than $50 billion to foreign lenders, which is 77 per cent of its gross domestic product (GDP). Next year, it must pay back more than $4billion of its foreign loans.
However, servicing its debts has become harder because the political crisis – which could last for months – has sent the rupee plummeting to its lowest ever level against the US dollar.The debacle illustrates the risks for China of entering into complex long-term relationships with nations with a recent history of political instability or even war.
Such dangers are also apparent in Pakistan. China’s biggest BRI investment in Asia so far is the $60 billion it is pouring into the China-Pakistan Economic Corridor. Pakistan has serious debt problems, yet in return for Beijing’s help, it may well agree to concede land and resources to China.
Elsewhere, China is trying to reach agreements for several infrastructure projects with Nepal and the Philippines. Will those countries be any more successful at managing the complicated arrangements and keeping out of debt, or will they also be obliged to concede precious assets to the Chinese?
These questions come at an important time globally, as the Chinese attempt to take their Belt and Road Initiative to the next stage. They are seeking wider acceptance in Asia, Europe and South America and recognise that bad publicity from Sri Lanka and Pakistan won’t help their cause.
Now would be a good time for the Chinese planners to ask themselves whether the whole process has a sufficient foundation of commercial common sense. Belt and Road is part of the Chinese constitution, which means it is interwoven with the ideology of the Communist Party. The rhetoric among diplomats and the state media is therefore always one of uncritical enthusiasm. But commercially, its investments resemble huge gambles. It is rather surprising to realise that, five years on, and with a trillion dollars already spent, careful assessments of which projects will actually work are only just beginning
The Chinese insist BRI is far more than a display of economic and geopolitical power and influence. They talk warmly of other objectives, such as connectivity, unimpeded trade and a closer understanding between people of different cultures.
Yet before they write more speeches, build more bridges or open new ports, they would do well to consider what value they see in investing in emerging economies – and how they can avoid fostering a dependency culture, which favours neither China nor its partners.