Belt and Road Initiative, Politics
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Crash Course: Belt and Road Initiative

The BRI will mean a rebalance of people, power and trade between the interior and the coasts, which will be positive for the world’s economy and for world peace. 

– Professor ZHANG Weiwei, Fudan University

Overview of the BRI

The Belt and Road Initiative (BRI) is cluster of infrastructure projects and transport activities that connect countries along the ancient Silk Road and maritime routes. The BRI is not a single project, but rather a massive initiative that involves diverse projects and participants.  The cost is estimated to be in the trillions of dollars.  According to official policy, the goals of the project include policy coordination, economic integration, increased trade, financial integration, people to people cultural exchanges, and international cooperation.[1]  This initiative was started by China and will increase China’s economic and political influence both in the region and globally.  Nevertheless, the project has worldwide benefits: global connectivity, increased prosperity, a new era of win-win attitudes in international relations, and regional stability. The success of the BRI is important for the future of China and the rest of the world.

The project became well known in 2013, envisioned by President Xi Jinping. During a trip to Kazakhstan in September 2013, Xi first introduced the Silk Road Economic Belt, and then in Indonesia in October 2013, Xi spoke of the 21st Century Maritime Silk Road in Indonesia.[2]  Together these projects – the 21st Century Maritime Silk Road and the Silk Road Economic Belt – became known as One Belt One road, or 一带一路. These projects were packaged and branded in 2017 as the “Belt and Road Initiative”.  There is enormous pressure for this project to succeed because it was incorporated into the Chinese Communist Party (CCP) Constitution at the 19th party congress. [3]

The official outline says that the BRI will “promote the connectivity of European and African continents and their adjacent seas, establish and strengthen partnerships among the countries of the Belt and Road, set up all-dimensional, multi-tiered and composite connectivity networks, and realize diversified, independent, balanced and sustainable development in these countries.”  This post explains the details of this quote: 1) the area and participants involved, 2) the types of projects, 3) the diverse, independent, balanced and sustainable development, and overall, 4) the beneficial impacts to the partners involved.

The Areas

The BRI connectivity stretches by land and water from China to the Middle East, East Africa, and Europe.  ‘Belt’ refers to the connection over the land corridor from China through Central Asia to Europe, known as the “Silk Road Economic Belt”.  ‘Road’ refers to the maritime route that connects China by way of South East Asia, the Middle East, East Africa, through the Suez Canal to Europe, the “Maritime Silk Road”.  A third proposed route is called the “Polar Silk Road”, which connects China to Europe through arctic waters. The three projects compliment each other and are part of the same integrated initiative.

Figure 1: BRI Connections (including active and inactive routes)

The land-based “Silk Road Economic Belt” is comprised of six trade corridors.   These are:

1) New Eurasian Land Bridge Economic Corridor (NELBEC)

2) China Mongolia Russia Economic Corridor (CMREC)

3) China Central Asia West Asia Economic Corridor (CCWAEC)

4) China Indochina Peninsula Economic Corridor (CICPEC)

5) Bangladesh China India Myanmar Economic Corridor (BCIMEC)

6) China Pakistan Economic Corridor (CPEC)

Types of belt infrastructure include rail, oil and gas pipelines, airports, roads, and technology infrastructure. A non-exhaustive list of countries connected by these corridors are: China, Mongolia, Afghanistan, Pakistan, India, Bangladesh, Iran, Iraq, Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan, as well as many European countries.

The NELBEC is set to be a logistics corridor for the transport of goods directly from Asia to Europe through Central Asia.  The NELBEC will create new opportunities for countries in Central Asia to participate as transport hubs and bring their commodities to newly connected markets. The CMREC will be a commodities route, while the CCAWAEC will be a commercial route. The BCIMEC connects oil and gas lines, with the long-term ambition of an extension to India. The CPEC is already strategically important for China because it will allow energy (oil) to arrive to China from Middle East countries via Gwadar Port in Pakistan when the pipeline to Xinjiang becomes operational.

The water-based “Maritime Silk Road” adds new ports and routes for shipments, as well as complimentary infrastructure within the countries for transporting goods inland, such as rail.  Some countries participating in the Maritime Silk Road are: China, Brunei, Cambodia, Indonesia, Laos, Malaysia, Myanmar, Philippines, Singapore, Thailand, Timor-Leste, Vietnam, Bahrain, Egypt, Iran, Iraq, Israel, Jordan, Kuwait, Lebanon, Oman, Qatar, Saudi Arabia, Palestine, Syria, United Arab Emirates, Yemen, Pakistan, India, and Sri Lanka, as well as European countries.  The maritime routes now include plans for a new “Polar Silk Road” that would reduce liquid natural gas delivery times by shipping through Arctic waters instead of the Suez Canal.  The plan was unveiled in 2018 in a white paper by the Chinese government.

Global Participants

Source: https://eng.yidaiyilu.gov.cn/

There are at least 65 countries involved in the BRI, although no official list is available.  Some sources indicate that the number of countries participating is as high as 138: 38 from sub-Saharan Africa, 34 from Europe and Central Asia, 25 from East Asia and Pacific, 17 from Middle East and east Africa, 18 from Latin America and the Caribbean, and 6 from Southeast Asia.[4]  Of European countries, Hungary, Greece, and Italy especially supportive. The countries that are directly affected by this initiative make up 38.5% of the world’s land mass, 62.3% of the world’s population, and 30% of the world’s GDP.[5],[6] With this massive impact in mind, it likely that almost every country globally will be at least indirectly affected by the BRI. The BRI includes low, middle, and upper income countries. 

The BRI has been a topic of interest to many international organizations such as: ASEAN, Asia-Pacific Economic Cooperation (APEC)[7], Asia-Europe Meeting (ASEM)[8], Asia Cooperation Dialogue (ACD)[9], and the China-Arab States Cooperation Forum (CASCF)[10]. Although some countries raise concerns, and some countries clearly gain from the project more than others, there is strong consensus that overall the BRI is an “effective strategy to promote trade, infrastructural building, FDI flows and therefore GDP growth.”[11]

International Financiers

The BRI projects have required investments in the trillions of dollars to date.  BRI could not go forward without the financial institutions that provide loans. Only some of the funding for BRI is funded by the Chinese government or Chinese banks, and other funding comes from private investment, development banks, and foreign governments.

Two crucial sources of funding for developing countries are the Asian Infrastructure Development Bank (AIIB) and the New Development Bank (NDB).  The AIIB is a development bank headquartered in Beijing that provides loans for infrastructure projects that benefit Asian economic development, such as roads, rail, ports, energy pipelines and telecoms.  AIIB opened for business in January 2016 after Xi Jinping proposed the idea in 2013.  The New Development Bank was established in 2014 by Brazil, Russia, India, China, and South Africa (BRICS) to sustain projects for development of emerging economies and infrastructure development.  China played a key role in making this organization operational, and its headquarters is in Shanghai.

Two other development banks, The China-Africa Development Fund (CDF) and the Export-Import Bank of China (EXIM), lend more to developing countries than the World Bank.[26]  The World Bank is unable to provide loans to developing countries because the requirements are too rigorous about environmental protection and financial guidelines. In a speech on June 5, 2014, Xi Jinping said that, “To promote the Silk Road spirit, we need to respect each other’s choice of development path,” meaning that developing countries need to be free to choose how to best meet their citizen’s needs and the country’s development plans.[12]  The establishment of the AIIB and NDB provide funding choices to sovereign developing countries in the BRI.

Chinese Participation

The funding for Chinese companies is provided by Chinese policy banks, such as the China Development Bank (CDB) and the Export-Import Bank of China (EXIM), as well as the Silk Road Fund. Over 50 state-owned-enterprises have participated in the BRI as suppliers, partners, and competitors in bids.   Privately-owned-enterprises are also competing in the markets opened up by the BRI, taking advantage of new opportunities for manufacturing, supplying equipment, selling smartphone technology and property development.

There is no central authority in charge of the BRI, but the initiative is overseen by the “Office of the Leading Group on Promoting the Implementation of Belt and Road Initiatives”, which itself is directed by the National Development and Reform Commission.[13] Other important Chinese agencies include the Ministry of Commerce, the Ministry of Foreign Affairs, and the Ministry of Culture.

Other Participants

Aside from governments and financiers, there are many other types of organizations involved, such as multilateral organizations like ASEAN, as well as international trade fairs and expos, and think tanks such as the Academy of Macroeconomic Research of National Development and Reform Commission.  Private entities are involved in the BRI through partnerships and acquisitions, and in capacity as suppliers, private financiers, and professional services (lawyers, consultants, and accountants).

The extent of this project is massive, held together through cooperation for bilateral and multilateral projects.

Types of Projects

There are reportedly over 1700 projects as part of the BRI. The projects are diverse in type and location.  Because the BRI is an initiative, not an exclusive member-country only project owned by China, and any country willing to sign on can participate and benefit.  Below is a selection of the projects.

Rail – Abuja-Kaduna Railway in Nigeria completed in 2014

Nigeria is the most populous country in Africa, thus needing to move goods and people quickly. This new railway connects Nigeria’s capital, Abuja, with its commercial capital, Kaduna. Four thousand people were employed by this project and it will sustain an additional 5000 jobs. The high-speed passenger train travels between 200-250km/hr carrying 5000 commuters. The cargo trains can carry 8t of goods between cities.  This project was jointly funded by state-owned EXIM and the Nigerian Federal Government.[14]

Port – Piraeus Port in Greece

President Xi Jinping has called Piraeus Port the “Head of the Dragon” and plays a key role as shipping hub between Asia and Europe.  The cost of this project is 600 million euros, an investment by COSCO Shipping (one of the world’s largest container shipping companies).  COSCO Shipping will own 51% of the project. China and Greece signed a mutual agreement to ensure that COSCO Shipping’s investment in the port will go ahead without interruption.[15]

Transport – Temburong Bridge in Brunei

China and Brunei cooperated on this joint project of a 30 km bridge that links Bandar Seri Begawan with Temburong district of Brunei, which is geographically isolated from the rest of the country. The cost of the project was $1.7 billion.  The bridge is the longest in Southeast Asia and is part of ongoing infrastructure investments and strategic relations between China and Brunei.[16]

Energy – Yamal LNG Project in Russia

The Yamal Liquid Natural Gas project is located in Russia’s Yamal Peninsula in the Arctic and is the largest plant of its kind.  There are three production lines with a combined capacity of producing 16.5 million tons of LNG per year.  The project opened in 2017.  The project was funded by Novatek (of Russia), Total (of France), the China National Petroleum Corporation and China’s Silk Road Fund.[17]

Trade – Djibouti International Free Trade Zone completed in 2018

Djibouti is a state on the horn of East Africa and home to an International Free Trade Zone.  The FTZ allows users to avoid the property, income, dividend or value-added taxes that drain investment activities.  The cost of this project was $3.5 billion and it is the largest FTZ in Africa, spanning 4800 hectares.[18]

Air – New Gwadar International Airport (NGIA) in Pakistan

The New Gwadar International Airport (NGIA) is to become a hub for domestic and international routes in both passenger and cargo capacities.[19] The estimated cost of this project is $230 million and is the second-largest airport in Pakistan. The project is fully funded by grants from China.

Technology – CPEC Fiber Optic Project in Pakistan

Phase One of this project is an 820 km stretch of fiber optic cable provides 3G and 4G connectivity to Pakistan. The total route will span 2950 km to connect Pakistan to Xinjiang, China. Huawei is responsible for the engineering, supply, and construction of this project. The route is alongside the CPEC ‘belt’ route as part of the larger connectivity project.  The cost of the project is $44 million and Phase One was completed in 2018.[20]

Goals and Development Benefits

The most important benefit of the BRI is that it will reduce transit cost and times and thereby, it will benefit world trade. However, the BRI benefits are not limited to transit time reductions and greater connectivity.  In fact, the benefits from the array of BRI projects will impact citizens through agricultural development, power-generation infrastructure, public health projects, education and job training, municipal infrastructure, increased tourism, cultural exchange.[21]

Mutual Benefits and Mutual Development

Developing countries need aid for their own domestic development.  The projects in Africa, Central Asia, Southeast Asia, South Asia, and the Middle East help these governments better provide services and employment opportunities for their citizens.  The projects play a valuable role in urbanization of rural countries, since railways and highways allow people to pursue employment in the city while maintaining family ties to the country. It is well known that urbanization generally results in better education citizens and higher incomes.   Infrastructure is desperately needed in developing countries if they are to catch up with advanced economies, because infrastructure facilitates both the movement of people to work and goods to market.

BRI is helping markets become integrated, especially in South Asia where lack of infrastructure and connectivity hinder productivity. Energy development and infrastructure ensure that factories can produce goods and employ people without power interruptions. Moreover, telecommunications connectivity facilitates rapid sharing of knowledge. Developing countries are using the BRI to increase their industrial capacity, create opportunities for their citizens, and to access global markets.  As industry and manufacturing increases capacity, this will lead to greater economies of scale due to both the ability to produce and to transport goods to buyers. For these reasons, the BRI plays a crucial role for current and future generations of developing countries.  China has experience in rapid development and urbanization since the time of Deng Xiaoping, and the China model for development sets an example for new developing countries.[22]  Xi Jinping, in a speech on 14 May, 2017, specifically notes these benefits for development as “mutual learning”, and “mutual benefit.”

China is committed to helping developing countries develop according to their own needs, allowing development paths to keep “with their specific national conditions that conform to the trend of the times.” The BRI is allowing poorer countries to use funding to invest in a broad range of projects that will support specific economic and social developments that serve the populations of these countries, rather than forcing austerity measures and loans at unmanageable rates.

There is some criticism that the development has a high cost for poor countries: loans at below-market rates are easier to pay back, but interest uses up money that would otherwise go into healthcare or social security.  Some governments have also reconsidered some projects, but by then the projects were underway and they were already loaded with debt.  Sri Lanka’s Hambantota Port is usual example given against the BRI.  However, this is the only case of its kind.  Pakistan, Malaysia, and other loan-receiving countries have maintained control of their agreements and have been allowed to cancel deals when they realize that they are not good for the citizens’ futures.  For example, when Malaysia did not re-elect the government that signed a deal, China allowed the country to cancel a high-speed railway project without penalty.  Developing countries must be responsible for evaluating:

  1. Debt sustainability risks – working with development banks to evaluate financial loans
  2. Governance risks – ensuring corruption-free project competition
  3. Environmental risks – natural environment destruction and emissions limits
  4. Social risks – workplace hazard and violence, and social tensions from wage gaps

By evaluating and avoiding these risks, developing countries can choose the correct BRI projects. As developing countries sign onto – and uphold – the right BRI projects, they gain international confidence, build development momentum, and build infrastructure that guarantees future prosperity.

Broad goals of the BRI in developing regions are “mutual understanding and friendship,” increasing “trust and good-neighborly ties,” “peace and cooperation,” and “openness and inclusiveness”.[23]  These overarching goals are important because they represent a future unifying vision that holds the many projects together. With many projects underway at different stages, all countries must keep forward movement toward the goal and avoid stalling individual projects.

Strategy and Opportunity for China

Decrease reliance on Domestic Market

China’s economy continues to grow, and it is the world’s largest manufacturing company and exporter of goods. The advantage of increased connectivity for China is access to markets in which it can sell the excess of iron and steel. Moreover, as construction in China begins to slow, overseas projects provide an opportunity to relocate excess employees. This in effect balances the needs of countries that need to purchase these products with China’s need to sell off its excess.  Furthermore, real estate development around these Silk Road infrastructure allows new opportunities for Chinese investors and Chinese developers, since the domestic real estate development market is in danger of becoming a “bubble”. The BRI provides a variety of opportunities that will maintain China’s economic growth with decreased reliance on domestic markets.

Increase International Standing of the Renminbi

Both the AIIB and the European Bank for Reconstruction and Development list the RMB as a financing currency, meaning that developing countries may borrow RMB rather than USD when it is to their advantage. The massive scale borrowing and number of projects in the BRI help to elevate the status of the RMB as a stable, global reserve currency.[24] 

Secure Energy Supply

With China’s economy continuing to grow, energy (oil and gas) supply is a persistent worry. China’s is the world’s largest importer of oil and is the world’s second largest energy consumer.  The BRI includes pipeline projects that will run through Central Asia, Russia, and Southeast Asia’s deep-water ports.  These pipelines minimize China’s risk due to US control of ocean shipping routes.

Increased Demand for Chinese Goods and Services

Economic growth in local and global markets is an opportunity for Chinese suppliers and professionals to access new markets. Chinese technology companies, for example, will have more customers financially capable of purchasing their smartphones and internet equipment.  New customers for whom an Apple or Samsung is out of reach may turn to less expensive Chinese smartphones, such as Honor, Hwawei, and Transsion (which dominates the market in Africa with 50% of the market share).[25]

From this discussion, it is clear that the BRI is extremely important to China’s future, and that the BRI is crucial for the rapid development of Asia, Africa, the Middle East, Central Asia, and trade in Europe.

Conclusion

This post has explored the details of the BRI, including geography, participants, projects and funding, as well as the benefits of sustainable development.  In doing so, it has also clarified some of the common misconceptions so that the project can be understood as a peaceful, cooperative, joint effort that is open, inclusive, and serves to benefit world trade and global prosperity.

What’s your opinion of the BRI: Is China’s influence too strong, or is it simply filling a global leadership vacuum?

Sources:

[1] Shang, Huping. “What Is the Belt and Road Initiative?” in The Belt and Road Initiative: Key Concepts, p.2-4.

[2] Xi, Jinping, “Work Together to Build the Silk Road Economic Belt”, September 7, 2013, p.315-19, and Xi Jinping, “Work Together to Build a 21st Century Maritime Silk Road, October 3, 2013, quoted in The Governance of China Volume I, p.320-24.

[3] “Belt and Road” incorporated into CPC Constitution – Xinhua | English.news.cn. (2017, October 24). Xinhua. http://www.xinhuanet.com/english/2017-10/24/c_136702025.htm

[4] Wang, C. N. & International Institute for Green Finance II Central University for Finance and Economics. (2020). Countries of the Belt and Road Initiative (BRI). Green Belt and Road Initiative Center. https://green-bri.org/countries-of-the-belt-and-road-initiative-bri

[5] Chin, H., & He, W. (2016). The Belt and Road Initiative: 65 Countries and Beyond (No. 2016). Fung Business Intelligence Center. https://www.fbicgroup.com/sites/default/files/B&R_Initiative_65_Countries_and_Beyond.pdf

[6] Huang, Y. (2016). Understanding China’s Belt & Road Initiative: Motivation, framework and assessment. China Economic Review, 40, 314–321. https://doi.org/10.1016/j.chieco.2016.07.007

[7] Senior officials, experts on APEC laud fruits of BRI cooperation – Xinhua | English.news.cn. (2018, November 19). Xinhua. http://www.xinhuanet.com/english/2018-11/19/c_137617707.htm

[8] Brattberg, E. E. S. (2018, October 19). Europe’s Emerging Approach to China’s Belt and Road Initiative. Carnegie Endowment for International Peace. https://carnegieendowment.org/2018/10/19/europe-s-emerging-approach-to-china-s-belt-and-road-initiative-pub-77536

[9] Asia Cooperation Dialogue. (n.d.). Asia Cooperation Dialogue. Retrieved November 7, 2020, from http://www.acd-dialogue.org/news-events-e.html

[10] Ministry of Foreign Affairs, the People’s Republic of China. (2020, July 6). China-Arab States Cooperation Forum Holds Ninth Ministerial Conference. https://www.fmprc.gov.cn/mfa_eng/zxxx_662805/t1795754.shtml#:%7E:text=The%20Arab%20side%20will%20work,and%20people%2Dto%2Dpeople%20and

[11] Voon, J. P., & Xu, X. (2019). Impact of the Belt and Road Initiative on China’s soft power: preliminary evidence. Asia-Pacific Journal of Accounting & Economics, 27(1), 120–131. https://doi.org/10.1080/16081625.2020.1686841

[12] Xi, p.320.

[13] Belt and Road Initiative. (2018, June 10). Belt and Road Initiative. https://www.beltroad-initiative.com/belt-and-road/

[14] Current Affairs Correspondent Africa. (2020, January 25). Significance of Belt & Road Initiative to Nigeria. Belt & Road News. https://www.beltandroad.news/2020/01/25/significance-of-belt-road-initiative-to-nigeria/

[15] Business Reporting Desk. (2019, November 12). Piraeus Port the Head of the Dragon: President Xi. Belt & Road News. https://www.beltandroad.news/2019/11/12/china-greece-agree-with-coscos-piraeus-port-investment/

[16] Parameswaran, P. (2020, March 31). New Temburong Bridge Opening Highlights China-Brunei Relations Amid Coronavirus Challenge. The Diplomat. https://thediplomat.com/2020/03/new-temburong-bridge-opening-highlights-china-brunei-relations-amid-coronavirus-challenge/

[17] Wang, Z., People’s Daily, Liu, K., Zhou, L., & X.N.A. (2019, April 4). 10 Amazing Belt and Road Initiative projects. Chinadaily.Com.Cn. http://www.chinadaily.com.cn/a/201904/04/WS5ca53641a3104842260b44e9_9.html

[18] The Martime Executive. (2018, May 7). Djibouti Inaugurates Africa’s Largest Free Trade Zone. https://www.maritime-executive.com/article/djibouti-inaugurates-africa-s-largest-free-trade-zone

[19] China-Pakistan Economic Corridor. (n.d.). New Gwadar International Airport. China-Pakistan Economic Corridor. Retrieved November 9, 2020, from http://cpec.gov.pk/project-details/33

[20] Ibold, S. (2018, October 19). BRI Factsheet Series – Pakistan-China Optical Fibre Cable Project. Belt and Road Initiative. https://www.beltroad-initiative.com/bri-factsheet-series-cross-border-optical-fibre-cable/

[21] Ibrar et al., p.39.

[22] Djankov.

[23] Xi, p.320.

[24] Djankov.

[25] Little-known Chinese phone-maker Transsion is boss in Africa. (2019, October 17). Nikkei Asia. https://asia.nikkei.com/Business/China-tech/Little-known-Chinese-phone-maker-Transsion-is-boss-in-Africa

[26] Joshua, J. (2020). Chapter 5: The Development of Infrastructure and Economic Growth. In The Belt and Road Initiative and the Global Economy: Volume I – Trade and Economic Development (1st ed. 2019 ed., pp. 105–134). Palgrave Macmillan.

Office of the Leading Group for the Belt and Road Initiative. (n.d.). One Belt One Road Portal. One Belt One Road Portal. Retrieved November 7, 2020, from https://eng.yidaiyilu.gov.cn/

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