These are surreal days. Speaking at a seminar to celebrate the fifth anniversary of his benchmark Belt and Road Initiative, President Xi Jinping stressed it was not just a “China club.”
On the contrary, it was “open” and “inclusive,” with a shiny new image for a shiny new era of “cooperation.”
“The Belt and Road is an economic cooperation initiative, not a geopolitical or military alliance,” Xi said in Beijing on Monday. “It is an open and inclusive process, and not about creating exclusive circles or a China club.”
Launched in a fanfare of state-media publicity by Xi in 2013, this epic project has become an extension of Beijing’s global ambitions and the centerpiece of its economic foreign policy.
At the heart of the program are a web of ‘New Silk Road’ superhighways, connecting China with 68 countries and 4.4 billion people across Asia, Africa, the Middle East and Europe in a maze of multi-trillion-dollar infrastructure projects.
“Beijing has invested more than US$60 billion in countries along the route, while trade volume has reached 5 trillion yuan ($734.29 billion), Xi confirmed in his speech, adding that about 200,000 ‘local jobs’ had been created in [BRI] countries,” the state-run China Daily reported.
Yet during the past three months, questions have been raised about the sheer scale of this venture amid allegations that it is nothing more than “debt book diplomacy.”
Last week, new Malaysian Prime Minister Mahathir Mohamad pulled out of a major Beijing-inspired railway project because of the costs, following Myanmar’s decision to scale back plans for a port due to debt risks.
Elsewhere, Nepal has been trying to halt construction on two Chinese-built hydroelectric dams while a rail link through Laos could end up being worth half of its GDP.
Gareth Evans, the former foreign minister of Australia, has even claimed that Laos and Cambodia are now “wholly owned subsidiaries of China” after borrowing more than $5 billion.
In a report released earlier this year entitled Examining the Debt Implications of the Belt and Road Initiative from a Policy Perspective, the Center for Global Development revealed that 23 countries could be prone to “debt distress.”
Of the group, Pakistan, Djibouti, the Maldives, Laos, Mongolia, Montenegro, Tajikistan and Kyrgyzstan were rated in the “high risk” category.
“The Belt and Road Initiative provides something that countries desperately want – financing for infrastructure,” John Hurley, a visiting fellow at the Washington-based think tank and co-author of the study along with Scott Morris and Gailyn Portelance, said in a statement.
“But when it comes to this type of lending, there can be too much of a good thing,” he added.
A study written by Harvard scholars Sam Parker and Gabrielle Chefitz illustrated the dangers when they warned the US State Department in May of the impact of what are perceived to be cheap loans, calling it “debt book diplomacy.”
The International Monetary Fund was more restrained but just as concerned about the financial risks when Christine Lagarde, the managing director of the IMF, touched on the same subject in April during a visit to Beijing.
Since then, views have hardened. Indeed, there have been rumblings in the “international community” that the world’s second-largest economy is using the Belt and Road Initiative to increase its political and military influence in Southeast Asia and beyond.
At the same time, trade tensions between China and the United States have escalated with a series of tit-for-tat tariffs on imports and rhetoric reminiscent of the old Cold War days.
“China is facing enormous challenges with these reactions from the [overseas] community,” Pang Zhongying, a foreign affairs specialist at the Ocean University of China, told the South China Morning Post. “Xi’s speech shows that [the leadership] has reflected on these developments and has made adjustments … and is trying to tone down its rhetoric.”
Still, it failed to stop Ning Jizhe, the vice-chairman of the powerful National Development Reform Commission, from wading into the controversy earlier this week.
He argued that the “New Silk Roads” were not “debts traps” and “high” financial risk in certain countries, such as Pakistan, were long-standing issues.
“The debt issues of some countries are not necessarily connected with the Belt and Road construction and relevant projects, as those countries have heavily borrowed from other [nations] and international financial organizations and thus are highly indebted,” he told a press conference at the Information Office of the State Council, the government’s de facto cabinet.
“China is a latecomer. It is not the biggest creditor,” he added.
While Ning raised valid points, they failed to appear in reports of Xi’s highly-profile speech. These are, indeed, surreal days.