Few projects illustrate the risks of China’s Belt and Road Initiative (BRI) as starkly as the Hambantota port in Sri Lanka. In 2017, unsustainable debt loads drove Colombo to give China a 99-year lease and controlling equity stake in the Hambantota port, while local communities protested the loss of sovereignty and international observers worried about China’s strategic intentions. The Hambantota case may be an outlier, but it has become a “canary in the coalmine,” and a warning sign to other BRI participants about what their future may hold. Increasingly, countries around the world are taking steps to reassert their influence over BRI projects—and Beijing has taken note.
This week, 37 heads of state and representatives from nearly 100 countries will convene in Beijing for the second Belt and Road Forum. At this gathering, the pressure will be on President Xi Jinping and the Chinese Communist Party to reassure audiences at home and abroad that China’s ambitious global project is viable, sustainable, and responsive to their concerns.
Introduced in 2013, China’s Belt and Road Initiative (BRI) is a sprawling, trillion-dollar effort to connect countries around the globe through trade, infrastructure, people-to-people exchanges, and policy alignment. Beijing promised a “community of shared future for mankind,” and leaders around the world clamored to sign deals for projects that would largely be built and financed by China.
Six years in, the initial euphoria has largely turned to fatigue. As projects move from the planning stages to implementation, many are not delivering the benefits they had promised. And both participating countries and China are recalibrating their approach from a focus on scale and speed to an emphasis on higher-quality projects.
Reality Sets In
Many BRI partners are now worried about the dangers of debt distress, loss of sovereignty, increased corruption, environmental degradation, lack of transparency, and unfair labor practices that often accompany these projects. Learning from one another, participating countries are becoming savvier in their efforts to renegotiate deals, push for higher standards, hold leaders accountable, extract concessions, and end projects that are no longer deemed to be in their own national interest.
In countries across Asia and Africa, BRI has had an impact on local politics and even national elections, prompting a careful reassessment of the initiative’s opportunities and risks. Last year, thousands of Vietnamese citizens marched in the streets to protest the creation of three special economic zones that would lease land to foreign (likely Chinese) companies. In response to public pressure in Burma, the government successfully reduced the overall cost of the Kyaukpyu port project by 80 percent and increased its stake in the surrounding special economic zone, while refusing to provide sovereign guarantees. Malaysia just renegotiated its rail project in exchange for a lower price tag and more jobs for local workers. And in Sierra Leone, the new president cancelled plans for a Chinese-funded airport late last year due to concerns about debt sustainability.
Beijing also faces domestic criticism of the initiative, with Chinese citizens questioning the wisdom of risky loans to developing countries, especially when that money could be spent on food, education, or poverty alleviation at home. And quietly, some critics worry the effort is too ambitious and may be suffering from its own overreach.
China’s slowing economy and growing debt problems at home pose additional obstacles, and some Chinese companies have put projects on hold due to the significant financial and security risks they face in many BRI countries.
Despite these challenges, Beijing will continue to search for a way to make BRI succeed. It has no choice, as Xi has staked his personal legacy and legitimacy on the initiative’s success.
BRI has moved beyond the soaring rhetoric and lofty promises, and now faces the tough work of implementation. In August 2018, at a special seminar marking the five-year anniversary of BRI, President Xi noted that the first five years had been devoted to establishing the broad contours of the initiative, but China must now shift its focus to the details, implementing higher-quality projects with stronger party leadership to guide the effort.
To ensure projects are economically viable, Beijing has strengthened its domestic processes regarding monitoring and supervision of overseas investment deals. New rules and guidelines govern the behavior of Chinese firms overseas, with an eye toward boosting due diligence, oversight, and quality control.
To counter accusations that China is using BRI projects to promote its political influence, Beijing is partnering with Western financial institutions and other countries, such as Japan, to implement joint development projects with higher levels of transparency and accountability. China also endorsed the G20’s Operational Guidelines for Sustainable Financing, which should further improve information sharing, with support from the International Monetary Fund and World Bank.
The tone and approach of China’s diplomacy on BRI has also changed. At the 2018 Forum on China-Africa Cooperation summit, China sought to alleviate concerns about debt distress by emphasizing grants and interest-free loans over the commercial loans it has favored in the past.
Through the introduction of smaller-scale projects aimed at providing near-term benefits, China is seeking to demonstrate to local communities that Beijing can be a reliable partner in these efforts. In addition, by going beyond traditional outreach to government officials, China is building a broader base of support for BRI through people-to-people exchanges and training programs for overseas civil society groups, media, political parties, students, and others who might be in a position to support (or oppose) projects in the future.
Many of the steps Beijing is now taking to blunt criticism of BRI may also help the initiative become more sustainable and better aligned with the needs of the partner countries over the longer term—but these initiatives run the risk of being more symbolic than substantive. As countries gather in China this week for the Belt and Road Forum, foreign representatives are well-positioned to leverage this moment of reassessment to demand greater transparency, higher standards, and higher-quality projects that go beyond platitudes and achieve meaningful change.
As China pursues its global ambitions, the United States and its allies and partners should continue to focus on implementing their own alternative approaches to economic development, and help partner countries around the world develop the capacity to make their own informed choices about future projects that are truly in their own best interest.