BRI: 一带一路

6 Responses to BRI: 一带一路

1. It appears that the BRI may be another facet of China’s problem of boosting their growth numbers through massive infrastructure projects that may not yield gains in the long run. This has been seen in the startling number of ghost cities observed across the nation, but this is an initiative that may have some practical uses.

   Surely, any country can benefit from expanding trade routes and facilitating the movement of goods from many foreign bodies, but the important question here is whether the gains from trade will outweigh the massive costs associated with this kind of undertaking. Also, China may use some of their power to force smaller regions to finance costs of the roads through their own territory, an action akin to Trump’s promises that Mexico will pay for his border wall.

   Ultimately, the greatest test of the BRI will be how the Chinese government allocates funds and chooses how to pay. A project this large requires massive financing, and with the vast currency reserves held by the Chinese treasury, it remains to be seen if they will dip into these to make a bet on trade gains from this project.

2. Overall, I think that China is using the BRI as part of its greater plans to becoming a great country once again. As China is growing and catching up with the developed world, so are its ambitions. I do have similar suspicions as the article in that China is giving out loans to countries so these projects can be built. However, many of these countries aren’t the most financially solvent. I think that China is trying to do a reverse Britain or something (think 99 yr lease HK) so China can eventually take ownership of some of these projects as collateral. Much of which is very useful and strategic. So, I think there are some “imperialistic” ambitions. China has military installments in Djibouti just like several other countries (which is near the Red Sea and the Suez Canal).

   I also think that BRI may be just no more than a PR boosting project for China, perhaps to distract from other issues China is facing and to perhaps foster relationships with other countries. These projects may get some countries to become closer/more reliant on China if they don’t have already. Some of these (land) projects go through China friendly countries like Russia, Iran and Pakistan.

   Also, the BRI provides a good alternative resource route for China. Much of the world’s trade goes through the South China Sea, which is rather narrow. Were that to somehow shut down, that would affect China. The BRI provides an alternative for China to receive and ship goods. Although land based transport is less efficient, it is “worth it” for national security/interests reasons. The BRI conveniently goes through the resource rich Middle East too.

   So the main reasons for the BRI: national security/interests, resources, building relations?
   The BRI, if it ends up being executed, will help solidify China as a major player in world affairs as a rising power. The BRI reflects China’s desire to be a great nation again after suffering through a century of humiliation prior to the People’s Republic. Overall, I think the BRI is a bit ambitious and may not have a 100% chance of success. I remember this viral video on the internet of this experimental bus in a Chinese city that “drove over” cars, I thought it wasn’t the brightest concept and at the end the project was scrapped. I believe that at the end of the day the shipping lanes will prevail as it is more efficient. Land-based transport as strong consideration for transport reminds me of the Third Front idea. Theoretically a good idea, just not practical. Just because an idea is “big” doesn’t mean it’s good.

3. The BRI, although having the potential to be a game changing investment for the well being and fostering of China as a competitive world superpower, faces an array of challenges. Struggles with loan interest rate and terms as well as logistical problems make this a difficult investment. Being a public transportation investment, by definition, this will not be largely profitable, meaning that if this project is at a great expense to the nation it may not make back much of the money it lost. Expanding China’s trade routes and transportation produces benefits to restoring the nation as an international super power, but at the end of the day there exist difficulties with suffocating costs of this investment.

4. A major factor of China’s rapid growth has been infrastructure (铁公基). Serious investments in infrastructure reduced cost of production and transportation of goods and services and increase productivity. However, as China begins to shift into a consumer economy, a slowdown in economic growth is inevitable. In order to maintain stability and offset some of the slowdown, BRI was introduced as an initiative to boost economic growth.

   However, as the blog post pointed out, the Chinese cities involved with BRI are all second-tier economic hubs with the exception of Guangzhou. It seems like China is going to be investing heavily in surrounding countries’ infrastructures and create better channels for trade practices. It certainly can help China raise its international status among countries benefiting from BRI but the return on investments is very much up in the air. I doubt that BRI can yield any meanings returns anytime soon.

5. The BRI exists at an interesting threshold between economic and geopolitical considerations: providing an outlet for Chinese capital that should lower transportation costs for Chinese firms and reinforce Chinese power projection abilities abroad. This is following the basis of US foreign power, with a global network of military installations that afford it tremendous flexibility in acting on the international sphere. This seems to be a viable strategy for China to exert itself on the world-stage, and probably is a justified reflection of China’s prominent position in the 21st century.

   However, the economic viability of this plan does raise some questions. If the BRI is to be understood as a public transportation service, subsidizing the transportation costs of Chinese firms without themselves earning a profit, than this is a sensible strategy. If projects instead are financed by Chinese banks, with no possibility of succeeding and including caveats for Chinese ownership of the foreclosure process, than this seems to be fairly predatory. If these foreign governments fear to exert their sovereign-rights in defense of failed projects than this seems to be an imperial endeavor. Additionally, I wonder if the BRI will be as relevant to the Chinese economy as it moves up the global value-chain and the proportion of commodity-dependent manufacturing in China decreases relative to Vietnam etc. In the US, the advantages in transportation costs between region brought upon by NAFTA have incited deep political resentment among those who find themselves excluded from its benefits. Is the Chinese government potentially opening itself up to internal criticism with highly publicized spending of money in foreign lands?

6. Since China’s economic slowdown and decline of internal migration, many of China’s steel, cement, and construction SOEs have built up excess capacity and struggled to find productive uses for their resources. A main goal of the BRI therefore is purported to put Chinese SOEs to work, so as to continue China’s growth strategy driven by investments and capital accumulation. However, many of the developing countries that are borrowing from Chinese banks to fund their large-scale infrastructure projects will be unable to generate enough revenue from their projects (at least in the short run) to cover debt costs, which calls into question the actual economic feasibility of the BRI. Furthermore, China has a no-strings approach to investment and does not require its partners to follow rules pertaining to corruption or financial sustainability, which increases the risk of expanding China’s already mounting load of bad debt.

   This leads me to believe that the purpose of the BRI has more to do with Chinese leaders’ long-term political incentives. It is possible that China is deliberately offering infrastructure financing to some governments at a level exceeding their ability to pay as a means to gain ownership over key foreign assets. In Sri Lanka, China signed a 99-year lease to operate the Hambantota port in exchange for reducing the government’s debt burden to China, leading other countries to fear that they too would be caught in a “debt trap.” Malaysia’s Prime Minister recently asked China to cancel its expensive infrastructure projects and called the BRI “a new version of colonialism.” Although addressing the genuine issue of domestic excess capacity and developing countries’ demand for infrastructure, the BRI seems to be mostly guided by Chinese geopolitical interests.