Over 2,000 years ago, a trail was blazed connecting the rich culture of the East with that of the West, and for another 1,500 years it acted as a highway for the transfer and trade of ideas, cultures, religions, goods, science and technologies. This trail is what we refer to today as the Silk Road. Developed during the Han Dynasty, the Silk Road became the hallmark of China’s golden age, allowing it to build long-distance trade and political networks. Although the Silk Road in its glory became a distant memory half a century ago, it got a new lease on life in 2013 when Peoples’ Republic of China’s (PRC) president XI Jinping announced the Silk Route Economic Belt and 21st Century Maritime Silk Route. United under the umbrella Belt Road Initiative (BRI), these two initiatives have attracted a lot of attention, some good and a lot bad. While Xi launched the BRI as a platform for international cooperation aiming to promote trade, foster financial inclusion, and facilitate people-to-people exchanges; many of them are concerned with the initiatives neocolonialist properties. Five years from its initiation launched, this article seeks to explore whether the BRI has proven to be the feared neocolonialist threat.
Let’s first discuss some of the basic properties of BRI. Firstly, the BRI at its roots is a large-scale multi-dimensional infrastructure project led by the PRC involving 78 countries across Asia, Africa, and Europe. Secondly, the initiative connects these countries by two physical routes developed through a number of economic corridors. One is a land route from central China to Southern Europe, and the other is a sea route from Shanghai to Venice via India and Africa. Thirdly, the initiative functions through Chinese investment in local and transregional infrastructure projects and bilateral and regional trade agreements. In order to support these transactions, the PRC has created a number of banks and funds such as the New Silk Road Fund (NSRF) of US$ 40 billion (£30.6 billon) and the Asian Infrastructure Investment Bank (AIIB). aNot only is this initiative large in physical scale, but it also requires an incredible amount of capital. PwC predicts that the BRI will mobilize up to $1 trillion (£ 765 billion) outbound Chinese state financing in the next ten years.
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So why did Xi launch this initiative? Since the economic liberalization reforms of President Deng Xiaoping in the 1980’s, the Chinese Communist Party has sourced its legitimacy from sustained economic growth. However, in recent years the Chinese economy has wavered from its positive trajectory as its GDP growth has decreased from 7.7 per cent growth in 2012 to 6.9 per cent in 2017. Thus, in order maintain regime security and execute his ‘China Dream’ national strategy, Xi’s first priority is bolstering the Chinese economy. The PRC’s economics ills have stemmed from the over-capacity and production of the majority of its industries namely coal, steel, and cement; and are also indicated by its disproportionate amount of foreign exchange reserves. Therefore, the BRI provides a comprehensive plan to mitigate these problems by creating new markets for its industry.
What are the concerns? As many look to history to inform their predictions of how states will interact, it is predictable that many might see the early stages of colonialism reflected in the BRI. As the PRC has increased in power, it accumulates the need for more resources to maintain its power; thus, it must look outside its sovereign boundaries for new sources. While this can happen in a symbiotic manner, history has shown that more often than not powerful states will take advantage of weaker states in this regard. Today, this type exploitative behavior is referred to as neo-colonialism, a term first coined by Kwame Nkrumah in his book Neo-colonialism: The Last Stage of Imperialism. Nkrumah writes, “The essence of neo-colonialism is that the State which is subject to it is, in theory, independent and has all the outward trappings of international sovereignty. In reality, its economic system and thus its political policy is directed from outside.” With this in mind it becomes clear that the BRI-based loans given developing countries might be an instrument through which the PRC might attempt to exercise its power for its own state interests much to the detriment of the recipient state.
Have neocolonialist predictions come true? While five years is a very short period of time to analyze in association with such as large-scale initiative, there have been a number of developments under the umbrella of the BRI, which provides insight into this prediction. Most notably has been the case of Sri Lanka and the Hambantota Port Project. Sri Lanka under President Rajapaksa was the recipient of a large loan from the PRC to develop the Hambantota Port with the state-owned China Harbor Engineering Company, a project which had been rejected by other lending countries due large doubt to its feasibility. Ultimately the port failed, and Sri Lanka began to struggle to repay its loans. The rapidly expanding debt amounting to roughly $1 billion (£765 million) was too much for the new government to take on and by December 2017 the Sri Lankan government relinquished the port and the 15,000 acres of land around it to the PRC. This transfer of power gave the PRC control of commercial and military waterways India has previously solely controlled. The Sri Lankan case proves the neo-colonialist concern. Firstly, taking into consideration the strategic value of this port for China both commercially and militarily, its initial investment become questionable, as the concern for Sri Lanka’s welfare was obviously sidelined for the PRC’s interests given the risk associated with the port. Thus, with this great likelihood of commercial failure, the PRC must have invested in it for strategic and military reasons as well. Speculation aside, however, this in-kind payment of an entire Sri Lankan port and surrounding areas is evidence of the PRC actively leveraging its debt for political gains. Therefore, the Sri Lankan case, while some might simply call it bad business, is still definitely exposes strong neocolonialist undercurrents in the PRC’s behavior.
Sri Lanka is not the only country that has taken these BRI loans. Ethiopia has also recently engaged in a $4 billion (£3.06 billion) railway project funded by BRI loans called the Addis Ababa-Djibouti Railway. As of 2016 this hefty price tag amounted to a quarter of Ethiopia’s government budget of $12.5 billion (£9.6 billion). Such a loan begs the question of how will it be paid. Will Ethiopia have to make economic concessions, political agreements, or give up some of its sovereignty like Sri Lanka. In this case only time will tell.
As part of the BRI’s China-Pakistan Economic Corridor (CPEC), Pakistan has also been a large borrower from the BRI, its loans amounting to $60 billion (£45.9 billion). This has also proven problematic for the country. Pakistan announced on October 11 this year that it is seeking an additional $8 billion (£6.1 billion) in bailout loans from the IMF to put towards its growing balance of payment crisis. As a result, Pakistan’s currency decreased in value by seven percent and the price of basic goods has gone up. The United States has already said it will not finance repayment of Pakistan’s BRI loans. Given the large amount of influence the Unites States has over the IMF, the future of Pakistan’s debt looks increasingly bleak. As with Ethiopia, more time will be needed to observe how Pakistan will repay the PRC.
While there are a multitude of additional factors that come with China’s BRI such as an influx of Chinese workers and goods, the loan based financial backbone of the BRI is enough to cause skepticism. On the point of whether the PRC has become a neocolonialist power, it is undecided as of yet. To call the PRC a neocolonialism power outright may not be entirely fair, as its real intentions are not entirely clear and in many cases, and it is hard to distinguish between bad business and neocolonialism. A more accurate analysis can be made in time when, for example, the PRC makes it next move in both Ethiopia and Pakistan. That being said the debt diplomacy the BRI has created must be watched carefully. Moving forward, the global community needs to work to prevent unfair and ill-fated Chinese investments.
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