Tightening up on the Belt and Road

A recent conference at Senate House explored how China’s ambitious OBOR initiative is impacting on Europe and beyond

The consequences of globalisation, lack of transparency and the assertion of Chinese soft power were among the issues debated at The Democracy Forum’s February 5 seminar on China’s Belt and Road Initiative and its impact on Europe, which took place in the imposing Chancellor’s Hall at London University’s Senate House.

In his welcome address, TDF President Lord Bruce spoke about global fears of Chinese hegemony surrounding the BRI, wondering whether it is simply a trade and security network, as China insists – albeit a hugely costly one comprising at least six geographic corridors – or a ‘multi-headed hydra unashamedly aligned with national self-interest’. In light of the huge hike in Chinese investment in the EU in 2016, Lord Bruce said that the essential challenge for Europe was to maintain a collective front in the face of China’s expansion.

Chair Dr John Hemmings, Director of Asia Studies at the Henry Jackson Society, highlighted the interlinkages between China’s foreign policy, aid, infrastructure, technology and sea-lane security, noting that while the BRI posesundoubted security challenges, it also presents opportunities.

(From left) Andrew Cainey, Theresa Fallon, Dr John Hemmings (chair), Kathryn Rand
(From left) Andrew Cainey, Theresa Fallon, Dr John Hemmings (chair), Kathryn Rand

Placing Beijing’s Belt and Road diplomacy and Europe’s response to it in perspective, Theresa Fallon, Founder and Director of the Centre for Russia Europe Asia Studies (CREAS), compared China’s ‘ambiguous’ and ambitious BRI project with Europe’s more ‘rules-based, top-down’ approach to trade, and spoke of the problem of BRI partner countries falling into the Chinese debt-trap, which has not only affected nations such as Sri Lanka but also potential EU member states straddled by the BRI, including Serbia and Montenegro. As a result of debts to China generated by BRI projects, these countries will find it very difficult to join the EU.

To elaborate her point, Fallon gave an overview of the BRI, Chinese investment in Europe, FDI screening, geopolitics and the public diplomacy of the People’s Republic of China, underlining the need for more transparency of Chinese companies operating within Europe as well as exploring China’s investment in the ‘16 plus 1’, which is pulling certain EU and EU accession states further away from Europe.She also addressed the clash of values between China and Europe amid growing concerns that the BRI was an attempt to shape the world according to China’s interests.A divided Europe is an opportunity for Beijing, she warned, emphasising the need for‘constructive vigilance’ by European nations.

Reflecting on how the Belt and Road pushback might be made more productive, Andrew Cainey, Associate Fellow at Chatham House’s Asia-Pacific Programme, considered how partner countries are pushing back on the BRI’s impact and terms, and what does and does not make sense for their sustainable development. While the BRI is meeting needs in emerging economies, with infrastructure investment a key enabler of economic growth, Cainey said this came with major caveats, since financing is not on concessionary terms, and oversight of SOE actions and tackling corruption are major issues in China, as in many of the BRI countries. But the BRI’s ‘vagueness’ is an advantage for the West and not just for China, he added, with opportunities for Western governments and multilaterals to latch on to the positives and push back on the negatives.

On the notion of ‘productive pushback’, he said there is a need to be competitive both economically or societally, choosing where ‘China should not be the only game in town’ and ‘stiffening the sinews’ by capacity-building, governance and transparency initiatives in partner countries, and taking an integrated overview of fiscal and debt risk.

The BRI’s implications for the international rule of law was the focus for Kathryn Rand, Assistant Director at the Great Britain China Centre, who said an interesting aspect of the Belt and Road was the nexus of politics and law. A huge challenge facing China will be the need to provide legal certainty for business, said Rand, whilst also maintaining its political oversight of the judiciary.

Chairing the second session, Duncan Bartlett, creator of the Japan Story blog and Editor of Asian Affairs, underscored the current significance of the seminar topic, commenting on perceptions of the BRI by both supporters and sceptics.

Dr Pervez Hoodbhoy, Zohra and ZZ Ahmed Foundation Distinguished Professor at Lahore’s Forman Christian College, called the BRI ‘a consequence of globalisation, which itself is a consequence of technology’. Looking at it in the context of the China-Pakistan Economic Corridor, he evaluated both China’s assertion that its BRI involvement with partner countries is purely on an economic basis, and its claims that the project will build local capacity and support sustainable development in those partner countries.

He lamented the continuing lack of transparency about Chinese investments in Pakistan and failure to hire enough local labour, except in security. Dr Hoodbhoy also expressed concerns about the dearth of local goods which have been replaced by Chinese products, and local people not getting their fair share of benefits. While the BRI might be a purely commercial project elsewhere, he did not believe this was true of Pakistan, as what is happening around Gwadar and Balochistan is more strategic.

Looking beyond the backlash against the BRI, Andrew Small, Senior Transatlantic Fellow at the German Marshall Fund’s Asia Program,asked whether Beijing could rebalance the initiative. Though he touched on the pushback from other major powers and in key BRI countries, he focused more closely on whether Beijing is capable of a serious adjustment, how far that is already happening, what shape such changes might take, and how we could respond. In many ways the BRI externalises much of what China has been doing itself internally for a long time, he said, calling China ‘as good a poster child as any’ for ‘huge expensive infrastructure projects with questionable returns, problematic debt levels, corrupt practices and environmental issues’.

He too spoke of the debt trap affecting partner countries and how it is extremely damaging to China’s reputation. As well as censure from countries such as the US and India, there has been much criticism of the BRI’s lack of transparency from ally Pakistan, and from inside China itself regarding the project’s excessive nature. But certain re-adjustments and rebalancing have tried to reduce some of the criticism– including paring back its scale and some debt rescheduling – while keeping much of the project’s initial thrust. Such developments matter because we are beyond what Small called ‘the crushing narrative of inevitability’ on the BRI, which suggested that the CCP’s way of doing business was the only way. It is unclear what the new model BRI will be like, he concluded, but BRI version 1 – ‘the straight-up externalisation of the China model’ – is not going to work.

Audience and panellists at the BRI seminar
Audience and panellists at the BRI seminar

Dr Sarah Ashraf, Policy and Research Manager, Institute for Strategic Dialogue, described the BRI as ‘less an institution with clearly defined rules, and more like a strategic vision’. She considered changes to the international order and argued that the EU must meet its Chinese counterparts at the same level, keeping several relevant factors in mind, such as learning how to compete with its own products in equal conditions, avoiding trade imbalances with China, and fomenting the creation and preservation of jobs in Europe following the acquisitions by Chinese companies.

In his closing words, TDF Chair Barry Gardiner MP, Shadow Secretary of State for International Trade, said the Chinese were ‘doing imperialism better than we did’.He spoke of the destabilising possibilities for China of the traffic that comes back along the BRI as pushback, the importance of focusing on the meaning of sustainable development, and how we are currently at a very difficult point in the way we adjudicate international disputes. Europe must step up to the plate, he concluded, if it is to respond to the need for infrastructure with the same verve and imagination as the BRI.

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