What is China’s Belt and Road Initiative

China’s Belt and Road Initiative (BRI)

by: Dr Yu Jie

Senior Research Fellow on China, Asia-Pacific Progame

jyu@chathamhouse.org

The BRI is an ambitious plan to develop two new trade routes connecting China with the rest of the world. But the initiative is about far more than infrastructure.

It is an effort to develop an expanded, interdependent market for China, grow China’s economic and political power, and create the right conditions for China to build a high technology economy.

Why create the Belt and Road?

There are three main motivations for the BRI. The first, and most discussed internationally, is China’s rivalry with the US. The vast majority of Chinese international trade passes by sea through the Malacca strait off the coast of Singapore which is a major US ally. The initiative is integral to China’s efforts to create its own more secure trade routes.

There is no doubt that China’s intention is also to make participating nations interdependent with the Chinese economy, and thereby build economic and political influence for China.

In that respect it has similarities with the Marshall Plan that followed the Second World War – but with the essential difference that China dispenses funding to other nations based purely on shared economic interests.

The second key reason for the initiative is the legacy of the 2008 financial crisis. China’s government responded to the emergency with a ¥4tn stimulus package, issuing contracts to build railways, bridges, and airports, but saturated the Chinese market in the process. The Belt and Road framework provides an alternative market for China’s vast state-owned companies beyond the borders of China.

Finally, the Belt and Road is seen as a crucial element in the Chinese government’s efforts to stimulate economies of the country’s central provinces, which historically lag behind richer coastal areas. The government uses the Belt and Road to encourage and support businesses in these central regions, allocating budget generously, and encouraging businesses to compete for Belt and Road contracts.

Why is it called the ‘Belt and Road’ initiative?

The Belt and Road Initiative is a relatively new name. Initially it was referred to as two separate projects, then as the ‘One Belt, One Road’ initiative, then finally as the Belt and Road Initiative.

The Belt

The Silk Road Economic ‘Belt’ element refers to plans for a revitalized series of ancient overland trading routes connecting Europe and Asia to be built largely with Chinese expertise. The idea was first proposed by Chinese president Xi Jinping during a visit to Kazakhstan in 2013, and central Asia is seen as the most vital region for the ‘Belt’ element.

The Road

In 2014 Xi Jinping outlined plans to additionally establish new sea trade infrastructure along the old Marco Polo route – a maritime silk road connecting China, Southeast Asia, Africa, and Europe. This would be a longer route avoiding the Malacca Strait, incorporating fuelling stations, ports, bridges, industry, and infrastructure through Southeast Asia and into the Indian Ocean. Pakistan is seen as perhaps the most crucial partner country in this effort through the China Pakistan Economic Corridor project.

The Belt and Road Initiative in Asia

China views the BRI as vitally important in securing its borders on the Asian mainland. It has land borders with 15 nations, including unstable states such as Afghanistan and nations seeking new partnerships in opposition to the US, such as Russia. Belt and Road investments are viewed as a way to facilitate China’s ‘periphery diplomacy’ – trade and infrastructure partnerships with the countries along this enormous land border.

How successful this can hope to be, coming eight years after the Chinese began their Initiative, and at a time of inward thinking by democratic governments, remains to be seen. But fears that the Belt and Road symbolises an inevitable establishment of a new, Chinese-led world order may be premature. The initiative is still relatively young and the opaque nature of its funding makes it difficult to assess its success.

Who is funding the Belt and Road Initiative?

The Chinese state is the underwriter for the initiative, via its four state-owned banks lending to state owned enterprises. Other governments have criticized the Belt and Road for the lack of private sector participation but there is little enthusiasm for the initiative from even the Chinese private sector due to the lack of return on investment.

How much does the Belt and Road Initiative cost?

It is difficult to estimate the cost of the BRI due to the lack of transparency around its funding but notably Beijing has not pledged any new state capital to the initiative since 2019.

Worsening relations with the US have caused Beijing to rethink its approach to the initiative and the risk involved.

Ambitions have been scaled back to China’s immediate sphere of Southeast Asia, South Asia, and Central Asia, with less investment in Europe and Latin America.

What is the Belt and Road Initiative’s infrastructure?

There are many projects in the Belt and Road but two leading prestige projects stand out. The China-Pakistan Economic Corridor consists of bridges, railways, energy installations, a redeveloped highway, and expansion of the Pakistani port of Gwadar. It is considered the leading part of the Belt element.

The China-Europe express railway is another prestige achievement credited to the Belt and Road Initiative as this cargo railway has slashed delivery time from China to Europe to 15 days.

The future of the Belt and Road Initiative

Following the COVID-19 pandemic Chinese state banks directed more support to projects at home, echoing the behaviour of much of the rest of the world. Internationally, China has drawn in the scope of its ambitions to projects along its enormous border and in Southeast Asia. Investments abroad have declined considerably since a peak in 2015.

In September 2020 Xi Jinping announced China would seek to peak its CO2 emissions before 2030 and achieve carbon neutrality before 2060.

This has real implications for Belt and Road investments, although China continues to invest in coal alongside considerable new investment in renewable energy sources such as wind and solar.