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China Belt and Road – Some Nations are Concerned About Debt

The Belt and Road Initiative (BRI) is the most ambitious building project in history as it seeks to link China with 65 countries across Asia and into Europe, which ties in over 30 percent of the world`s GDP and 75 percent of the known energy reserves. The BRI will incorporate the Silk Road Economic Belt to Europe, and the Maritime Silk Road, linking China to South East Asia and the Middle East oil states. The BRI project could, if realized substantially reduce trade costs and encourage growth and investment. Evidence suggest that the 30 day trip from China to Europe by ship is cost effective but again, it does take 30 days. Trains move bulk in half that time but are much more expensive. With regards to time saving procedures, goods move in 10 days across G7 countries. However, in Central Asia, goods can take 50 days in transportation and compliance in these areas with undeveloped systems, and it is the Belt and Road initiative plan that seeks  to rectify this logistics bottleneck.

However, there are questions being raised by those countries participating in the development of Belt and Road. In a recent study undertaken by a Singapore Think Thank showed that as much as 70% of respondents in Malaysia, the Philippines and Thailand believe that their governments need to be very careful and very conservative when discussing BRI with China. 

About half of those surveyed believe that China is now a greater power in the region, and a full 60% also believed that the global power of the United States is diminishing. Despite this, 16% expect that the BRI plan will fail with a third also believing the plan to lack transparency. 

India has been clear that it sees the funding patters and large loans under the BRI plan to be pushing countries investing into serious debt traps. And thus will not be joining. 
In addition, real concern has been raised by nations who feel that they are taking on too much debt, and may have to, in the end, surrender infrastructure project projects built under the BRI plan, to Chinese control. Specifically, Pakistan, Malaysia, Myanmar, Bangladesh and Sierra Leone have canceled or have stepped back from their projects. BRI financing and leases imposed have raised questions about sovereignty. One nation, Sri Lanka borrowed billions of dollars from China, built a port and realized they had too much debt, so they turned the port over to China with a 99 year lease. China uses the port as it wish. This is happening as Chinese state-owned companies are cash rich and offer cheap loans and credit. Some of these loans are too good to be true, so now country after country are refusing to take them as they are resisting what Malaysian Prime Minister Mahatir Mohamad has called China’s attempt to economically colonize weaker countries. 

Malaysia, Myanmar, and Pakistan have all reduce the size or have postponed projects. Mohamed has suspended a list of projects worth $22 billion, while Myanmar reduced one project from $7.3 billion to $1.3 billion. Countries who, in the end, owe Beijing money will be forced in some cases to sign over land deeds and territory to China. This is a growing concern as China has been very aggressive in loans and credit but will take territory and infrastructure as collateral when time comes to repossess from countries that cannot pay.  

In fact, there is also resistance coming from as far afield as Europe with Germany showing signs of concern over China’s growing ambition. The Federation of German Industries has recently called for the European Union to help fight what it calls unfair competitive methods like dumping and compulsive technology transfers. 

Either way, as we begin the third decade of the 21st century, China is growing as a regional power, with many other nations believing it to be at their expense. 
And because of that, push back against Chinese Economic Imperialism is already being registered in not only Africa but now South and Southeast Asia. 

Team Classiarius

 

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