New York Times – Supreme Leader China, Xi JinpingThe Belt and Road Initiative, also known as the New Silk Road, was established a decade ago to use the country’s economic power to increase its geopolitical weight and combat China’s influence. we and other industrial democracies.
Since then, China has spent about $1 trillion to most developing countries, mostly in loans, to build power plants, roads, airports, communications networks, and other infrastructure projects. Xi has used China’s financial and infrastructure expertise to unite countries in Asia, Africa, Latin America and parts of eastern and southern Europe.
The Silk Road Memorandum created for China a role in global development that rivals that of the United States and the World Bank. But, despite all the influence it brought BeijingThe initiative has contributed to rising debt levels to unsustainable levels for dozens of poor countries.
China also directed contracts to its own companies and, in some cases, built expensive, low-quality projects that did not stimulate economic growth. Now, with representatives from many of the nearly 150 member states of the Silk Road Memorandum meeting in Beijing this week for a summit, the shape of the initiative is beginning to change.
China’s role has shifted from being the world’s largest bilateral creditor to also being the largest debt collector. The government is now focusing on smaller grants for more environmentally sustainable projects.
In 2021, China announced a new financial framework, the Global Development Initiative, to complement the New Silk Road.
These changes highlight how China’s growing debt and economic problems are limiting its ability to project its financial power abroad. Boston University’s Center for Global Development Policy calculates that China’s issuance of external loans and other development financing peaked in 2016 at nearly $90 billion, then fell to less than $5 billion in 2021, the most recent data available.
China has taken a tough stance in negotiations on debt relief for countries such as Sri Lanka, Suriname and Zambia.
The rise of the Belt and Road
Wang Jiesi, founding president of the Institute of International and Strategic Studies at Peking University, published a document in July 2012 that would reshape China’s foreign policy doctrine.
Worthy march west (And on his way west), he said China should pay less attention to confronting powerful U.S. allies in the east — such as Japan, South Korea, Taiwan and the Philippines — and focus more on Central Asia and the Middle East. Xi adopted this approach after he took power later that year.
China had just begun shipping goods to European markets on trains that followed the paths of the 2,000-year-old Silk Road across the steppes of Central Asia. Xi traveled to Kazakhstan, China’s western neighbor, and announced the “Silk Road Economic Belt” in September 2013.
Four weeks later, after Southeast Asian countries requested to join, Xi announced a “Maritime Silk Road” to connect Southeast Asian and South Asian countries with East Africa.
The initiative then became global, including wealthier countries that appeared to have fragile relations with the United States. In 2019, Hungary, Portugal and even Italy, a member of the Group of Seven major industrialized democracies, signed agreements to cooperate with what was until then called the “One Belt, One Road” initiative. The same thing happened with Iran, Saudi Arabia, and countries in Latin America and Africa. For China, broader economic influence has sometimes brought political complications.
This was demonstrated in China’s initial cautious statements following Hamas attacks in Israel. China’s state television and the rest of its global propaganda apparatus emphasized Israel’s bombing of Gaza in response to the earlier Hamas attack, and presented China as the true friend of the world’s poor.
Environmental problems and debt
In the years before the pandemic, Chinese companies, especially those in construction and engineering, rushed to make deals financed with large loans from Chinese banks. Many developing country leaders have welcomed China’s willingness to provide loans with few of the environmental and human rights restrictions that multilateral institutions and Western lenders have long demanded.
Much of the work produced vital infrastructure such as roads and train lines. But other projects have contributed significantly to greenhouse gas emissions linked to climate change. In the early years of the Belt and Road Initiative, China was a major international lender and builder of coal-fired power plants in developing countries.
Xi announced two years ago that China would no longer build such factories. But Chinese companies continued to work on coal-fired projects under previously signed contracts. Improving environmental sustainability will be a major theme for the next phase of development lending in China. Hey People’s Daily newspaperThe Communist Party’s main newspaper said on Friday that China would “build a clean Silk Road.”
Switch to investing
Chinese banks have linked interest rates on many BRI infrastructure loans to international interest rates on dollar loans. As global interest rates rise and the value of the dollar rises, developing countries are stuck with very high bills to repay these loans. The economic shock that countries suffered due to the epidemic exacerbated their financial problems.
China responded by allowing poor countries to defer some payments but resisted calls for debt relief.
China has also begun financing less risky projects.
In late August, the China Development Bank agreed to lend $400 million to the African Export-Import Bank to provide trade financing to small and medium-sized enterprises. Cai Xue, a financial lawyer in Beijing, said recent coups in Western-allied countries in Africa’s Sahel region showed that a better model was needed and that China could provide it by financing several small loans.
“The loans provided by China for agriculture and transportation projects can increase household income and people’s hope so that they do not overthrow governments,” he said.
Tilt away from the west
From the beginning, the Belt and Road Initiative was not just about lending money, but was also about conveying China’s political views, just as the West has long used development aid to promote democracy.
China has joined the initiative with authoritarian countries such as Syria and Myanmar, which have been condemned by the West for their human rights violations. This division will be clearly evident in the expected attendance of Russian President Vladimir Putin at the summit, which Xi invited during a visit to Moscow in March.
Putin rarely leaves Russia, and this year the International Criminal Court issued an arrest warrant for him on suspicion of ordering the illegal deportation of children from Ukraine. It is expected that most leaders and diplomats from European countries will not attend the forum. Italian authorities have indicated that their country may withdraw from the Belt and Road Initiative.
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