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China must be persuaded to keep BRI within international rules

Beijing's road back to global greatness goes via partnership not one-sided expansionism

| China

The recent controversy over China's Belt and Road Initiative sparked by claims that it is pushing partner countries into debt traps has prompted suggestions that Beijing might review or even scale down the huge project.

This is most unlikely. Chinese officials have heard the criticisms that have been voiced, not least by Malaysian Prime Minister Mahathir Mohamad, who indirectly referred to Beijing's big debt-financed schemes as "a new form of colonialism." But China will not be seriously diverted from its course as it sees BRI as nothing less than the fulfilment of a historic mission.

Rather than trying to block China, or deny Beijing its claims to returning to global greatness, BRI partner countries should seek to persuade Chinese officials to adhere to the existing rules-based international order.

After President Xi Jinping conceived it as his geostrategic brainchild five years ago, the BRI has gained wide significance. If it achieves its ambitious goals, BRI will expand and impose China's footprint over the Eurasian landmass and maritime domains across the South China Sea and the Indian Ocean. This project can be viewed as China's "manifest recovery" to regain the imperial greatness lost over the last 200 years, analogous to America's "manifest destiny" of continental conquest in the 19th century.

Both expansionary moves reflect inevitability and entitlement, but China's renewed expansion is a repeat performance unlike America's. BRI harks back more than a thousand years to when trade thrived along the "silk road" between the Middle Kingdom and the West. By the early 15th century, the overland route was complemented by Admiral Zheng He's maritime voyages. Western textbooks teach that Europeans forged sea routes to new lands in what has been dubbed the "Age of Exploration." But the Chinese may well have done it beforehand only to see their country later subjugated, and their achievements go unacknowledged. This is BRI's historical context.

When Xi came to power in 2012, China was enjoying growing stature, but its global "peaceful rise" had to be managed. To maintain economic growth and stability at home in the face of increased market saturation and diminishing returns meant having to find new markets and investments abroad.

In Kazakhstan in September 2013, Xi announced the "Silk Road Economic Belt," which was coupled a month later with his landmark speech in Indonesia about a "21st Century Maritime Silk Road." Since then, both the overland and maritime routes have emerged at the forefront of international affairs.

On the face of it, BRI is a natural outgrowth of China's breakneck expansion at home. After three decades of phenomenal annual growth, overcapacity beset the Chinese economy. Gross domestic product growth has slowed to around 6%. Despite its huge size, China's domestic market is insufficient to absorb the production overcapacity. Its burdensome state-owned enterprises are particularly vulnerable to economic slowdown. The problems posed by urbanization, consumerism and urban-rural inequality have become alarming.

The only way forward was to make the world China's ultimate market. As its trade and external investment has rapidly expanded, China has become a major driver of global growth.

But more lies behind BRI than addressing overcapacity at home. China wants to increase its economic and financial power by promoting the yuan as a global reserve currency. That the yuan is part of the International Monetary Fund's Special Drawing Rights basket of leading currencies testifies to China's ambitions. If the yuan is to become a global currency, China must overcome the stranglehold of the mighty U.S. dollar and its structural power.

In recent years, however, the yuan has struggled trying to become a global currency. According to People's Bank of China, the yuan was the world's fifth most-used payment currency in 2016 and eighth in global foreign exchange transactions. Only 29% of China's trade was settled in its own currency. The cross-border role of the yuan peaked in 2015 and has since declined, amid depreciation fears. Making the yuan a global currency will require China to promote its use by foreign entities.

This is where the BRI comes in. BRI is backed by considerable financial muscle. BRI-related Chinese loans include $30 billion from the China Development Bank, $80 billion from the Export-Import Bank, $30 billion from the Asian Infrastructure Investment Bank (AIIB) and $20 billion from the New Development Bank. China's Silk Road Fund provides a potential further $40 billion. All told, some $900 billion has been earmarked for BRI projects in 60-odd countries, covering more than 4 billion people along land and sea routes.

As a land power, China wants to reduce its dependence on sea lanes for its energy supplies since they remain vulnerable to U.S. naval supremacy. More than 80% of China's crude oil imports and 30% of its natural gas imports from the Middle East are shipped through the Straits of Malacca. If the Straits are ever closed, China would be crippled. The U.S. is the only country with the naval might to dominate both the Indian and Pacific oceans.

China's land-based Belt projects, such as those in Pakistan, are meant to reduce China's maritime vulnerabilities. The China-Pakistan Economic Corridor, with an estimated cost of $40 billion, has incurred both India's ire and local resentment, but China views these risks as unavoidable.

BRI has triggered international opposition. At the geostrategic level, the "Free and Open Indo-Pacific" concept supported by the U.S., Japan, Australia and India is meant to check China's expansionist projects. The FOIP still lacks a concrete vision and resources, but it is codified in America's National Security Strategy as its main engagement strategy in Asia and is likely to gain traction.

Some of the countries involved in BRI projects - not just Malaysia but also Sri Lanka Pakistan and Montenegro - have expressed increased concerns about becoming trapped in debt traps due to Chinese loans. Such suspicions are likely to intensify.

China may believe that it is within its rights to reclaim global influence it lost long ago by reviving its ancient Eurasian and oceanic trade routes. For others across the affected landmass and sea lanes, neither denying China's historical role nor accepting its expansionist aims is the correct course of action. Instead, the best way forward is to persuade China to make BRI and its financing vehicles, such as the AIIB, consistent with existing international rules and institutions.

China's collaboration with the Asian Development Bank over BRI's links with existing regional cooperation initiatives is a step in the right direction. Approaching BRI with a "win-win" premise and mindset, rather than as a "zero-sum" proposition, is the only way for China to engender the necessary trust from other countries.

In turn, BRI's partner governments should give China a chance while not hesitating to speak up for a fair deal. China should be allowed to regain some of its past glory as long as it does not undermine the rules-based international order that has enabled all countries to rise, especially China itself.

Thitinan Pongsudhirak teaches international relations and directs the Institute of Security and International Studies at Chulalongkorn University in Bangkok.

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