Understanding the Belt and Road Initiative

by Admin (Posted on February 8, 2024February 8, 2024)

By Nnanda Kizito Sseruwagi

Probably you have heard about it. Probably not. What is it? Let us first understand what it isn’t. Many initiatives from China suffer from being misunderstood, even at the highest echelons of policy experts around the world. This is due to the saturation in public media internationally by Western propaganda and culture, which has bred most of us. We are therefore predisposed to be suspicious of any agenda, idea, initiative or policy from “others” i.e. not the collective West. That’s why it’s important to begin by explaining what the Belt and Road Initiative (BRI) has been disarticulated to be.

Firstly, it isn’t about Debt Trap Diplomacy. BRI has been grossly misrepresented in the media as China’s means to propagate an empire across the globe by intentionally loaning developing countries sums of money they cannot repay. And that in default, China will turn around and attach national assets and gain strategic control of countries’ resources. Not only is this an oversimplification of the complexities involved in the financial architecture of BRI, but there is also no evidence found for a single national asset auctioned to China by any developing country that defaulted on a loan.

What is widely available is evidence where China has written off billions of loans owed to China by African countries including forgiving interest free loans that reach maturity. For example, in 2022,  China announced debt cancellation of 23 loans for 17 African countries. Also, a study by Deborah Brautigam, the director of the China-Africa Research Initiative at Johns Hopkins University concluded that between 2000 and 2019, China restructured about $15 billion in African debt adding that to date, no evidence that China has been involved in any asset seizures.

Secondly, some critics have expressed concerns that misunderstand the BRI as a subtle strategy that China is employing to pursue military interests. This might be more a reflection of what those critics would have done and less to do with China’s primary goal. It is in China’s interest and strategy for long-term success as a nation to maintain its founding ideals of peaceful coexistence and mutual respect for all nations. Building its military muscle would threaten a global conflict with America and it has nothing to gain from such a catastrophe, yet it has everything to gain in pursuing economic success.

Having dispelled the major misconceptions and misrepresentations of what BRI isn’t, let’s understand what it is. The Belt & Road Initiative is ironically China’s promotion of a Western-born idea and process of globalisation. It is generally agreeable that globalisation is synonymous with global Westernisation, which might be why the West generally criticises China for BRI because it is a way of China overtaking them on their own game. The BRI is a restoration of the ancient Silk Road Economic Belt and 21st-Century Maritime Silk Road Development Strategy.

This initiative is designed to increase global connectivity, primarily through constructing gigantic infrastructure projects. Its broader aim is to link Asia, the Middle East, Africa, and Europe via railways, highways, sea ports and other infrastructure and trade channels. By 2023, over 150 countries and about 75 percent of the global population had signed up under the initiative.

BRI’s stated objectives include; constructing a unified large market, making full use of both international and domestic markets through cultural exchange and integration, enhancing mutual understanding and trust of member nations, and creating innovative patterns of capital inflows, talent pools, and technology databases. The project also intends to fill the infrastructure gap in developing countries which promises us increased economic growth.

To become a member of BRI, countries sign a memorandum of understanding with China regarding their participation in it. The Government of China maintains a profile of all member countries and Xinhua News Agency, China’s state media house, releases a press statement whenever a memorandum of understanding related to the Belt and Road Initiative is signed with a new country.

Financing of BRI mainly comes from the Chinese government. It has injected billions of dollars into Chinese public financial institutions, such as the Chinese Development Bank (CDB), the Silk Road Fund (SRF) and the Export-Import Bank of China (EXIM). As policy banks, these enjoy low borrowing costs given that their bonds are Chinese government debt with very low interest rates.

The Central Bank of China also lends cheaply to both Chinese and foreign companies working on BRI projects. Multilateral financial institutions, such as the Asian Infrastructure and Investment Bank (AIIB) and the New Development Bank (NDB), Commercial banks, such as the Industrial and Commercial Bank of China (ICBC), China Construction Bank, and the Agricultural Bank of China also provide loans and financial services for this initiative. China has also established bilateral agreements with some member states to finance BRI projects through concessional loans (loans characterized by more generous terms than market loans e.g. below-market interest rates, long-term grace periods etc.), grants, or other financial instruments. It should be noted that BRI projects’ financing mechanisms may vary per project specification, the country involved or the type of infrastructure being developed.

Cynics have not spared critiquing the BRI. Most of its critics are policymakers from non-participant countries, especially the United States. They have called it a plan for a Chinese-centered international trade network to make it unpopular. In fact, panicking about the success of BRI, the United States, Japan, and Australia formed the Blue Dot Network (BDN) in 2019 to support infrastructure investments around the world. As though BDN wasn’t effective, in 2021, Western nations comprised under the G7 introduced another initiative called Build Back Better World (B3W). As developing countries, let us cautiously navigate how to achieve our own interests from this project finance competition among global powers.

The writer is a Lawyer and Research Fellow at the Development Watch Centre.

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