Chinese President Xi Jinping’s tenure has been marked by high ambition. His vision – the “Chinese dream” – is to make his country the world’s leading power by 2049, the centenary of communist rule. But Xi may be biting off more than he can chew.
A critical element of Xi’s strategy to realize the Chinese dream is the One Belt, One Road (OBOR) initiative, whereby Beijing will invest in infrastructure projects abroad, with the goal of bringing countries from Central Asia to Europe firmly into China’s orbit. When Xi calls it “the project of the century”, he may not be exaggerating.
In terms of scale or scope, OBOR has no parallel in modern history. It is more than 12 times the size of the Marshall Plan, America’s post-World War II initiative to aid the reconstruction of Western Europe’s devastated economies. Even if China cannot implement its entire plan, OBOR will have a significant and lasting impact.
Of course, OBOR is not the only challenge Xi has mounted against an aging Western-dominated international order. He has also spearheaded the creation of the Asian Infrastructure Investment Bank, and turned to China’s advantage the two institutions associated with the BRICS grouping of emerging economies (the Shanghai-based New Development Bank and the US$100 billion Contingent Reserve Arrangement).
At the same time, he has asserted Chinese territorial claims in the South China Sea more aggressively, while seeking to project Chinese power in the western Pacific.
But OBOR takes China’s ambitions a large step further. With it, Xi is attempting to remake globalization on China’s terms, by creating new markets for Chinese companies, which face a growth slowdown and overcapacity at home.
With the recently concluded OBOR summit in Beijing having drawn 29 of the more than 100 invited heads of state or government, Xi is now in a strong position to pursue his vision. But before he does, he will seek to emerge from the National Congress of the Communist Party of China later this year as the country’s most powerful leader since Mao Zedong.
Since taking power in 2012, Xi has increasingly centralized power, while tightening censorship and using anti-corruption probes to take down political enemies. Last October, the party bestowed on him the title of “core” leader.
Yet Xi has set his sights much higher: He aspires to become modern China’s most transformative leader. Just as Mao helped to create a reunified and independent China, and Deng Xiaoping launched China’s “reform and opening up”, Xi wants to make China the central player in the global economy and the international order.
So, repeating a mantra of connectivity, China dangles low-interest loans in front of countries in urgent need of infrastructure, thereby pulling those countries into its economic and security sphere. China stunned the world by buying the Greek port of Piraeus for $420 million. From there to Seychelles, Djibouti and Pakistan, port projects that China insisted were purely commercial have acquired military dimensions.
But Xi’s ambition may be blinding him to the dangers of his approach. Given China’s insistence on government-to-government deals on projects and loans, the risks to lenders and borrowers have continued to grow. Concessionary financing may help China’s state-owned companies bag huge overseas contracts, but by spawning new asset-quality risks, it also exacerbates the challenges faced by the Chinese banking system.
The risk of non-performing loans at state-owned banks is already clouding China’s future economic prospects. Since reaching a peak of $4 trillion in 2014, the country’s foreign-exchange reserves have fallen by about a quarter.
The ratings agency Fitch has warned that many OBOR projects – most of which are being pursued in vulnerable countries with speculative-grade credit ratings – face high execution risks, and could prove unprofitable.
Xi’s approach is not helping China’s international reputation, either. OBOR projects lack transparency and entail no commitment to social or environmental sustainability. They are increasingly viewed as advancing China’s interests – including access to key commodities or strategic maritime and overland passages – at the expense of others.
In a sense, OBOR seems to represent the dawn of a new colonial era – the 21st-century equivalent of the East India Company, which paved the way for British imperialism in the East. But if China is building an empire, it seems already to have succumbed to what historian Paul Kennedy famously called “imperial overstretch”.
And indeed, countries are already pushing back. Sri Lanka, despite having slipped into debt servitude to China, recently turned away a Chinese submarine attempting to dock at the Chinese-owned Colombo container terminal. And popular opposition to a 6,000-hectare industrial zone in the country has held up China’s move to purchase an 80% stake in the loss-making Hambantota port that it built nearby.
Shi Yinhong, an academic who serves as a counselor to China’s State Council, has warned of the growing risk of Chinese strategic overreach. And he is already being proved right.
Xi has gotten so caught up in his aggressive foreign policy that he has undermined his own diplomatic aspirations, failing to recognize that brute force is no substitute for leadership. In the process, he has stretched China’s resources at a time when the economy is already struggling and a shrinking working-age population presages long-term stagnation.
According to a Chinese proverb, “To feed the ambition in your heart is like carrying a tiger under your arm.” The further Xi carries OBOR, the more likely it is to bite him.
Mr Chellaney is one of these fine gentlemen that wags his finger in your face telling you I am so so smart. This article shows the mans true colors———a jealous hater that does not have a clue how things work in China. Maybe Mr Chellaney should devout some of his wisdom on how to help India become a economic tiger not the paper tiger that it is. He mentions how China bought the port of Piraeus from the Greek government———-but he failed to mention after buying the port the money the Chinese poured into the project to modernize it. That was a coup for the Chinese acquiring the port that gives them access to the Adriatic and MORE important to the all important Mediterranean and beyond. As I say to the Chinese haters or doubters————-China does not care——–China keeps marching forward!
Tim Ebrahimy China is not only claiming sovereignty over the islands in the South China Sea, China is alos claiming sovereignty over the sea. There is a big difference between the "islands" and "sea". If China were allowed such a claim, it implies she may claim all the other seas; other countries will be also allowed to do so.
China in my view is following a benign economic policy of up lifting the regional as well as far flung national economies of countries connected via the silk road. However in the case of countries like Pakistan CHina beware due to Pakistan’s total chaotic instability and an uncertain future coupled with corruption like the bank of BCCI where Pakistani officials made out with billions in gulf Arab depositors cash. Pakistani military is closely allied with that of US and Britain.
China’s economic interes over time may migrate into military adventurism and domination through ownership of seaports. China is after all flexing it’s military muscle by claiming sovereignty over the islands in the South China Sea, China’s military might should be countered by equal military force to maintain peace through détente.
Ha! Ha!
Keith McLennan –
(1) China is not an empire. Look up the word "empire" in the dictionary, and then see how it’s actually used in the real world.
(2) I wrote "Paul Kennedy had used it ("imperial overstretch") to refer to military and economic coercions …" So why do you take that to mean "solely military"? I further indicated that there’s a military component behind the idea – the word "component" in English means a constituent part, not the whole or the only ingredient.
(3) There is a big difference between raising (i) an argument and (ii) a question. And in either case, "overstretch" is not the same as "imperial overstretch" – Paul Kennedy put "imperial" there for a reason. Otherwise, almost anything can be called "imperial overstretch" – the Vietnamese, Indonesian, Malaysian, Philippines governments are pushing their maritime boundaries in the South China Sea. Can their economies sustain such a military push? (question raised, therefore using your line of reasoning, their actions are all "imperial overstretch"). Ukraine is claiming Crimea as part of its territory. Can Ukraine sustain a military conflict with Russia? (question raised, therefore using your line of reasoning, Ukraine is committing "imperial overstretch"). India is building aircraft carriers and high speed railways even though half of the Indian population live below the poverty line. Is it wise and sustainable? (question raised, therefore India is committing "imperial overstretch"). Ethiopea (or Congo, or Zimbabwe) is borrowing money for huge infrastructure projects. Can the poor country sustain that kind of spending? (question about sustainability raised, therefore it’s committing "imperial overstretch")…
(4) Will China last till 2049? Frankly, you’ve got far more pressing issues to worry about yourself.
A subset of this plan has been already built into the contract with Turkey. That is, this platform for wholesale and retail, for sellers and consumers, within the contract with Turkey is to include all the nations along traditional Silk Road, and it will be available in all the languages of those countries. China’s Uyghur region will become a center of warehousing for Chinese suppliers within the network. Turkey has a gigantic portion of sofware building, as well as coordination with the participating countries. There is a political benefit as well. Linking various Turkic populations withing the trading network, it is encouraging connections through trade. This will connect many ethnic Turkic populations not only in China and Central Asia, but in Russia and Iran. This is not about phoney multi-culturalism, but about the real self-interest of real people in a more interconnected world.
My goodness! We have been listening to the stories of China bank failures for decades now. But it was Western system that failed in the meantime, not Chinese.
The author has no idea what he is talking about, as the priority of the narrative seems to be marginalization of sucesses so far, and demoralization of those that are considering joining various projects.
The poverty of those nations taking Chinese credit is not an issue — the viability of projects is the key. Every infrastructure project that allows for higher economic activity results in positive cash flow, and an easy repayment of loans. The problem with many Western loans is not only the onerous structure of its financial side, but political hooks being built into them.
Take for example the work in Serbia. Once upon a time, a steel mill was sold to US steel, and after being used to melt down Serbia’s arms and tanks — one of the conditions for the honour for Serbia gettong US steel deal. But after the political task was done, US Steel sold the mill back to the government for $1, but under condition of Serbia repaying debts of US steel, some of them being in Slovakia.
Enter OBOR deal. Chinese company that bought the mill already invested two hundred million euros in modenization, did not lay off workers, and is making profit. State now has tax revenue, people jobs, and what was a heavy financial burden on state, is now a profitable entity, with additional income generating businesses that service the mill. Local economy has profited as well. By comparison, most privatizations under European style neoliberal formula, ended up being sold and resold, every time with more financial burden added to the nation’s budget, loss of work places, and damaged to the entire regional economy.
If this is how empire operate, by all means let’s have more of them. But I am afraid the rhethoric in this article is geared to tell us a story about bad China, and the benevolent, transparent and so wholesome Western countries just warning naive customers of the evils of empire. The problem is, the narrative is not working. It is — transparent.
This initiative is a work in progress still in its initial stage and not even Beijing knows exactly how the final result will be but that it is necessary start. By threat of imperial overreach, i assume the author is referring to the United States.
Jack Ma’s Alibaba has an ambitious global e-business plan called "WTP (World Trade Platform)".
Just as Facebook’s vision to connect the people all over the world, Jack Ma’s vision is to connect the consumers of the world with the suppliers of the world, or, to build a globally connected online trade platform.
Overstreched plan? Maybe. Right direction? Definitely yes! Maybe It will take 100 or 200 years, but it’s the right thing to do.
Same as China’s century plan OBOR. �
Truly Most Sincere Advice from a Very Clever Indian.
It is common sense that when you have bigger pond to fish, you tend to get better result then fishing in a overfished one. China Belt and Road initiative allow all players to fish in a bigger pond, result can only be better than to confine each others activity in a single Nation.
This sad character Chellaney has no idea how the government in China functions and draw wild baseless conclusions.
All major policies are subjected to a vote in the Central Committee and submitted to the Party congress for endorsement and approval. The BRI does not belong to Mr Xi but rather to China itself. It is the child of think tanks and intellectuals studying, analysing and formulating policy directions via papers and submissions to the government.
Professor Brahma Chellaney has totally misunderstood the term "imperial overstretch" – Paul Kennedy had used it to refer to military and economic coercions from an existing empire that were clearly unjustifiable, unsustainable and perhaps even indefensible. There is an essential military component behind the idea.
China is clearly not an empire (the US owns that title presently).
There is no military or economic coercion in the OBOR initiative. China does not have a real bluewater navy (the US is the largest naval power; it also has close to a thousand military bases overseas).
China has just begun the process of implementing the very first steps of the OBOR initiative, and therefore has not spent any significant amount of money, especially compared to what China can afford to spend. The US, on the other hand, meets and exceeds this critia, as the national debt is higher than its gross GDP, and yet the government is still borrowing money that it cannot possibly repay. Unfunded liabilities of the US govt runs in the hundreds of trillions now. That’s, I submit to you Mr Chellaney, is overstretch.
The US meets all the defining elements of "imperial overstretch" while China meets none. It’s not even close.
Last but not least, US rating agencies (Moody’s, S&P, Fitch) cannot be relied upon for genuine, truthful, or professional opinions regarding economic and financial matters. Their atrocious (some would say criminal) records prior to the 2008 subprime crisis alone should have been a strong enough wake up call to anyone who have ever used their services.
Sorry, professor Chellaney, you’ve missed the mark by miles.