GIS Dossier: China’s Belt and Road Initiative

A map of the various links envisioned in the Belt and Road Initiative
China’s Belt and Road Initiative will connect markets in Eurasia like never before, and could tip the geopolitical scales in Beijing’s favor (source: macpixxel for GIS)

GIS Dossiers aim to give our subscribers a quick overview of key topics, regions or conflicts based on a selection of our experts’ reports since 2011. This survey compiles GIS experts’ analysis of how China is using its Belt and Road Initiative to gain economic and political leverage around the globe.

If the ancient Silk Road still operated today, what would it look like? China thinks it has the answer, and has set out making its vision a reality in the Silk Road Economic Belt and 21st-century Maritime Silk Road development projects – otherwise known as the Belt and Road Initiative, or BRI.

The BRI is vast in scale, including ventures on three continents and two oceans. It would connect China to Europe and other parts of Eurasia through a network of infrastructure including roads, railways and ports. Virtually every country on the Eurasian landmass would feel the impact – and many already have. The program was announced in 2013, and China has wasted no time.

These huge investments will give Beijing tremendous sway over the economies affected

Trade is at its heart – most of China’s economic exchange with the world currently takes place via the Pacific Ocean. The BRI might not change that state of affairs, but would at least better connect China to important markets in Europe, Africa, the Middle East and Central Asia.

These huge investments will also give Beijing tremendous sway over the economies affected by the BRI and undoubtedly increase its geopolitical influence. For that reason, Eurasian powers such as India and Russia, as well as other global players like the United States, remain wary of China’s intentions.

Political dominance

In September 2017, GIS expert Henrique Schneider outlined how China was using the BRI as a road to hegemony in Eurasia. The project has been hailed as the next step in globalization or the beginning of a better economic era – and even as proof of China’s commitment to free trade. But considering the project from a purely commercial perspective misses the point, wrote Mr. Schneider: “The BRI is about politics – the politics of Chinese hegemony.”

In each country, projects clearly put Chinese geopolitical interests at the center. Going back centuries, Chinese foreign policy has focused on using trade to grow rich, make its army strong and attain dominance. Chinese President Xi Jinping clearly sees parallels in his country today and the Han Empire of old. When it comes to increasing China’s influence abroad, “[e]ven financially dubious projects in corruption-ridden countries like Pakistan and Kenya make sense for military and diplomatic reasons,” he pointed out.

Global implications, domestic goals

In 2015, GIS expert Dr. Frank Umbach examined the BRI from several perspectives in a two-part series. In the first report, he pointed out that the undertaking (which was then called the “One Belt, One Road initiative, or OBOR) would require cooperation with key players in the region, such as Japan, India and the United States. “That could be a tall order,” he wrote. “China’s bilateral relations with all three countries are mixed, involving both economic cooperation and competition, as well as some unresolved disagreements.”

Six corridors and a maritime belt

The Silk Road Economic Belt includes six “corridors”: the New Eurasian Land Bridge, running from western China to western Russia; the China-Mongolia-Russia Corridor, running from northern China to eastern Russia; the China-Central Asia-West Asia Corridor, running from western China to Turkey; the China-Indochina Peninsula Corridor, running from southern China to Singapore; the Bangladesh-China-India-Myanmar Economic Corridor, running from southern China to Myanmar; and the China-Pakistan Economic Corridor, running from southwestern China to Pakistan. The 21st Century Maritime Silk Road is planned to create connections among regional waterways from China’s east and south coast to the Indian Ocean to Africa and through the Bab el-Mandeb Strait to the Mediterranean.

Along with its goal of regional integration, the Chinese government sees the BRI as an instrument to mitigate its increasing economic difficulties. The project ties into the government’s domestic development strategy and is seen as a driver for future economic growth. Moreover, it is a “vehicle to strengthen the central government’s direct control over China’s economy.”

To their own detriment, the U.S. and European Union, wrote Dr. Umbach, have taken an ambivalent attitude toward the project. Washington has neglected Central Asia since it pulled out of Afghanistan, while the EU is only beginning to wake up to the opportunities the BRI presents. On the other hand, China has quickly gained a foothold in regions that the U.S. and Europe have considered their sphere of influence. Chinese investment in the Balkans, for example, could give Beijing significant sway.

“If the U.S. and Europe do not become more actively involved” in the BRI, concluded Dr. Umbach, “they not only risk losing business and investment opportunities in the most economically dynamic region in the world, but also undermine their own wider global economic and geopolitical standing and influence.”

Money bazooka

In the second installment, Dr. Umbach examined the huge amounts of money China was throwing at the initiatve. Its main tool for this purpose is the Asian Infrastructure Investment Bank (AIIB), which had 57 founding members (including the United Kingdom), though it was opposed by both the U.S. and Japan. Its initial capital base was $100 billion. China holds the biggest share in the AIIB.

“As if that weren’t enough,” wrote Dr. Umbach, “Beijing has established a $40 billion Silk Road Fund to finance future infrastructure and transport networks,” under the BRI. Aside from that, China has already invested more than $50 billion in infrastructure in Central Asia and the Caucasus alone. The projects go beyond rail, road and maritime transport, and include energy infrastructure development, including pipelines, coal mines and coal-fired power projects.

Chinese President Xi Jinping unveils a sculpture at the opening ceremony of the AIIB in Beijing
Chinese President Xi Jinping applauds during the opening ceremony of the Asian AIIB. The bank will provide much of the funding for the BRI (source: dpa)

There are some constraints, however. First, China’s economic slowdown could limit its investment capabilities. Also, the projects are all dependent on a politically stable environment. While Central and South Asia are not known for their stability, BRI investment projects could help keep unrest in check.

China’s geopolitical rivals – including Russia, India and Japan, all have something to gain from the BRI. But if it fails, “it could reduce security in China’s neighborhood and fuel internal unrest in regions such as Xinjiang and Tibet. That, in turn, could threaten the future economic and even political stability of China as a whole,” Dr. Umbach concluded.

European passivity

In a July 2017 opinion piece, GIS founder Prince Michael of Liechtenstein argued that Europe cannot afford to stay out of the BRI. “At stake are Europe’s links to what will soon be the largest markets on the planet,” he wrote. But Europe remains passive in the face of this initiative. “Leaving the Belt and Road Initiative exclusively to Beijing would surrender control and many advantages,” he continued. “The entire continent could use better access to East Asian markets. … The expanded land routes that would help western China develop would also bring more prosperity to Central and Eastern Europe, through better access to Asian markets.” Europe should “actively participate” in the project, he argued.

Furthermore, Europe’s involvement in protecting the sea lanes and developing ports along the Indian Ocean would make the whole initiative less threatening to the U.S. than if it were mainly a Chinese project. “On the land routes, European participation could give the Central Asian nations more options besides choosing between Russia and China,” wrote Prince Michael, concluding that for Europe to lose control over such trade routes would be a “disastrous choice.”

At a GIS conference in Warsaw, Poland in November 2017, the speakers also saw plenty of benefits for Europe to get involved with the BRI. “This kind of opening could be an economic win-win,” said Ryszard Czarnecki, a Polish member of the European Parliament. “But it is important that the benefits are mutual.”

Indian resistance

In June 2017, GIS expert Pramit Pal Chaudhuri wrote how India had become the most vocal critic of the BRI. One point of particular contention is the China-Pakistan Economic Corridor (CPEC), which passes through a part of Pakistani Kashmir claimed by India. “New Delhi believes it constitutes a violation of Indian sovereignty,” wrote Mr. Chaudhuri. When China first announced the project, India’s reaction was mixed. When it turned out that CPEC would be the cornerstone of the project, New Delhi’s stance became more hostile.

Chinese officials sought to convince New Delhi by arguing that the BRI would stabilize Pakistan, helping to revive its manufacturing sector and boost its overall economic fortunes. At a time when the U.S. was reducing its commitments to Afghanistan and Pakistan, the project would also make terrorism less attractive for Pakistan’s unemployed youth, according to China.”

New Delhi will continue to sign up other governments to oppose the BRI

“New Delhi, which sees the problem of Islamic extremism in Pakistan as a consequence of that country’s military-dominated politics, remains unconvinced,” wrote Mr. Chaudhuri. “Also, since the corridor would run through the western tip of Pakistani Kashmir, in territory claimed by India, New Delhi felt it would be politically impossible for it to endorse the project publicly.” China’s development of the Sri Lankan port of Hambantota roused plenty of suspicion from New Delhi, too. In 2014, Chinese nuclear-powered submarines docked there for the first time.

For the moment, however, tensions between India and China have been ratcheted down – and with them India’s vocal opposition to the BRI. As Mr. Chaudhuri wrote in June 2018, China and India have agreed upon what amounts to a geopolitical truce. Both countries have more pressing challenges on their plates. “Each side will avoid provoking the other,” wrote Mr. Chaudhuri. However, in the long term, “the sense of rivalry between the two countries will not diminish. China will continue to expand its economic and military footprint in the Indian Ocean. New Delhi will continue to sign up other governments to oppose the BRI.”

Middle East: serious engagement

As GIS guest expert Brendan O’Reilly pointed out in a March 2016 report, China is stepping up its engagement in the Middle East through the BRI as well. The clearest sign that Beijing is serious about gaining influence in the region is its establishment of a military base – its first overseas – in Djibouti, on the Horn of Africa. The base is “ideally positioned” to give China a strategic toehold in Africa and the nearby Arabian Peninsula, wrote Mr. O’Reilly. “It will put Chinese ships at the Bab el-Mandeb strait, a crucial choke point for trade where the Red Sea meets the Indian Ocean. It could also serve as a stepping-stone to more substantial force projection in Africa or the Middle East.”

President Xi Jinping has also made high-profile visits to Iran, Saudi Arabia and Egypt, underscoring China’s economic interests there. China is the world’s largest importer of petroleum, and Saudi Arabia remains China’s largest source of imported oil.

Not only would the BRI help to shore up these ties, it would secure critical overland routes between China and Europe. By gaining transport routes through the Middle East, China will be able to bypass maritime bottlenecks in the Indian Ocean and South China Sea, Mr. O’Reilly pointed out. “For the BRI to succeed, its routes through the Middle East must remain open and secure.”

Global reach

More than 60 countries, with a combined GDP of $21 trillion, have expressed interest in participating in the BRI. The project includes countries that together account for about 65 percent of the global population, one-third of the world’s GDP, and a quarter of all the goods and services the world moves. Several institutions were created to finance the initiative: The Asian Infrastructure Investment Bank has $100 billion, between a third and a half of which China will provide. The Silk Road Fund, with around $40 billion in capital for investment, was also created. Then there is the New Development Bank, which received $100 billion in investment capital.

Beijing is benefiting from distrust of Washington’s inconsistent policies in the region, and has found willing partners in Iran, Egypt and Saudi Arabia. “In the event of increased tension between China and the U.S., Beijing could increase military and diplomatic initiatives in the Greater Middle East to counter Washington’s influence,” wrote Mr. O’Reilly. “The region could be split into pro-American and pro-Chinese camps along political fault lines that already exist.” China’s interests seem to resonate more within the Iranian sphere of influence, including Iraq, the Assad regime in Syria and Tehran’s proxies in Lebanon and Yemen, he concluded.

Russia: losing the great game

China’s foray into Central Asia with the BRI is a move on Russia’s home turf, wrote GIS expert Professor Stefan Hedlund in August 2017. While Russian President Vladimir Putin and Chinese President Xi have met numerous times and signed several agreements on bilateral investment, the Chinese have clearly gained the upper hand, he said.

Beijing has played a long-term strategy, first building pipelines and investing in Central Asian nations, breaking Russia’s stranglehold over the region and reducing China’s need for Russian energy supplies out of eastern Siberia. The BRI forms the second stage in this plan, and entails building infrastructure “across a region that Russia still considers part of its backyard. Russian involvement in this project is chiefly reduced to benevolent smiling on the sidelines,” wrote Professor Hedlund.

He added that the transformation in the region has been “momentous”: use of the Russian language and the Cyrillic alphabet is on the decline. As the economic, political and cultural ties fray, so too does Russia’s influence in the region.

Chinese President Xi Jinping (R) shaking hands with Kazakhstani President Nursultan Nazarbayev at the Great Hall of the People in Beijing, June 7, 2018
Kazakhstani President Nursultan Nazarbayev (L) and Xi Jinping agreed to closer cooperation in June 2018. Beijing’s influence in Central Asia is rising thanks to the BRI (source: dpa)

The U.S., for its part, does not have a regional strategy, wrote Professor Hedlund, leaving the Chinese as the victors in Central Asia: “With Moscow and Washington bereft of new ideas, the designated winner in today’s version of the Great Game is Beijing. In the scramble for energy assets, China is outflanking both Russia and the U.S., while the BRI is cementing its influence,” he concluded.

Arctic route

In 2017, China even proposed creating an Arctic maritime trading route between itself and Western Europe as part of the BRI. It expanded on this idea in a white paper released in January 2018. As GIS expert Dr. James Jay Carafano wrote in May 2018, concerns among Arctic countries were growing as to Beijing’s intentions. “Beijing’s demand for a more prominent role in Arctic governance has unsettled nations in the region,” especially the U.S. and Western Europe, he said. “Even Russia, which has also partnered with China on Arctic projects, has shown unease about seeing its dominance as a polar power leveraged or eclipsed by the Chinese.” However, the United Kingdom and Canada have been more sanguine.

It is difficult to know how much influence such a Chinese-dominated route would grant Beijing. In 2016, there were only 19 commercial Arctic crossings. In the same year, more than 75,000 commercial vessels passed through the Strait of Malacca.

For now, however, Western countries have not offered any alternative. “The role the U.S. will play is pivotal, but unclear,” wrote Dr. Carafano. The new administration in Washington has not established a direction for its Arctic policy. In the short term, he predicted, there is unlikely to be any coordinated response from Arctic nations. But on the other hand, suspicion of China, especially in Scandinavia, will keep Beijing from playing a more prominent role in organizations like the Arctic Council. In the long term, the security concerns of a rising China in the Arctic may convince NATO to take action in the region. The U.S., especially, is likely to add more civilian and military infrastructure in the Arctic, Dr. Carafano wrote.

Impact on Southeast Asia

While most BRI projects link China with markets to the west, Beijing has not neglected other countries in its neighborhood, including some with which it has strained ties. China is making huge investments in Southeast Asia, transforming its relationships there. The influx of money is helping to split organizations like the Association of Southeast Asian Nations (ASEAN).

The BRI helps China sow disunity within ASEAN, especially over issues like the South China Sea

Beijing’s influence over Thailand, for example, is increasing. A proposed $5.5 billion rail link between its industrial eastern seaboard with southern China – a BRI project – has not hurt. Indonesia, on the other hand, sees the BRI as yet another attempt by China to encroach on its maritime territory, and launched the Global Maritime Fulcrum policy in response.

The U.S.’s decision to opt out of the Trans-Pacific Partnership has left some Southeast Asian countries groping for reliable trade partners, and has encouraged Beijing to move forward more aggressively with its proposed Regional Comprehensive Economic Partnership (RCEP) free trade agreement.

What is clear is that the BRI helps China sow disunity within ASEAN, especially over issues like the South China Sea. With countries in the bloc unable to agree on a stand against China’s aggressive moves in this critical arena for global trade, Beijing can continue to build up military installations on reclaimed islands and atolls to shore up its claims to nearly the entire body of water.

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