China's propaganda portrays the OBOR as a no-brainer, but participants may face destructive debt and an imbalanced distribution of economic benefit.
“The belt moves on the land, the road moves on the sea. The promise that they hold is joint prosperity.” So goes a Belt and Road children’s music video which has appeared on YouTube.[1]
China’s new Silk Road project, originally called One Belt One Road (OBOR) is a route of highways, railroads, sea lanes, ports, energy grids, financial institutions, and fiber optic cables, running from Singapore, north through Malaysia, Thailand, Lao and Vietnam, crossing west to China’s Xinjang Province, then on through Central Asia and Pakistan, linking to the oil fields of Iran, and into both the Middle East and Africa. This project initiated in 2013 was meant to increase connectivity and economic development through 60 countries. OBOR will be paid for through debt financing originating from one of the numerous Chinese lead institutions such as The Asian Infrastructure Investment Bank and the Silk Road Fund.[2] The concessionary loans for these many infrastructure projects will be assessed against the countries receiving them and are meant to be repaid through increased GDP.
The project, now called “Belt and Road Initiative” has recently received more promotion from China. Although Belt and Road Initiative began four years ago, Xi Jinping scheduled a Beijing summit from May 14-15, 2017. The summit serves the purpose of promoting OBOR under its new name and comes at a time when the Chinese economy is slowing. Ensuring uninterrupted trade may be the prime goal of this summit or perhaps Xi Jinping needs to remind the people that this was his brain child in order to maintain his power within the Communist Party. This year, the Communist Party will hold an important conference, and portraying himself as the economic savior of the country would help ensure that Xi Jinping maintains his position.[3]
While OBOR is embraced by the governments of developing countries, such as Vietnam and The Philippines, of the 29 heads of state expected at the summit this week, the only G7 leader attending is Italy’s Prime Minister Paolo Gentiloni.[4] The Chinese media has cited Trump’s refusal to join either OBOR or to attend the conference as examples of increased US protectionism, which is impeding globalization. These sentiments were echoed in a video from Lyndon LaRouche’s LaRouche Pac which urges the US to join the New Silk Road, stating “It would be the biggest mistake ever if the US didn’t take advantage of the Belt and Road Forum in Beijing.”[5] The video even has a sound bite from Helga Zepp-LaRouche, Founder and Chairwoman of the Schiller Institute, saying “If we can convince President Trump to take up the offer to join with China and the other nations in the New Silk Road, he can become one of the greatest presidents in the history of the United States.”[6]
If Chinese state run media is to be believed, essentially everyone apart from Trump loves OBOR, particularly the children singing in a video produced by Fuxing Road Studios, which also produced the Shi-San-Wu video about China’s thirteenth Five-Year Plan.[7] The video depicts children of varying ethnicities singing in English “The belt moves on the road. The road moves on the sea. The promise that they hold is joint prosperity. The trade routes open up. That’s when the sharing starts. Resources changing hands…we’re sharing a world of prosperity.”[8]
Beginning with the January, 2017 World Economic Forum in Davos, Xi Jinping began a narrative of China being the new champion of global free trade.[9] A similar message seems to have been attached to OBOR, projecting China as a benevolent force bringing as much peace and prosperity to as many countries as possible. The OBOR music video goes on to extol the noble goals of OBOR. “We’re paving new roads, building more ports, finding new options with friends of all sorts; it’s a culture exchange, we trade in our wealth, we connect with our hearts, it strengthens our health.”[10]
Chinese-produced English-language media exalting the virtues of OBOR do not end with the music video. The Chinese government even made a series of videos for YouTube—which is blocked in China—depicting an allegedly-American father telling a bedtime story to his five-year-old daughter, Lilly, explaining why he has to go to the OBOR conference in Beijing. Lilly asks her father, “It’s a Chinese initiative, right?”, and the father answers, “It’s a Chinese idea, but it belongs to the world.”[11] Later, Lilly asks, “Globalization? What’s that?” and the father explains, “That’s where people from different parts of the world cooperate more. They buy and sell things to each other. And they visit and even live in each other’s countries…. It’s good for people. We lead happier lives when we cooperate.”[12] The father goes on to explain that OBOR is necessary because some countries do not want globalization right now. Lilly’s smile and enthusiastically reveals that she approves of OBOR and suggest that we should too.
In the fourth video, Lilly asks where the countries will get the money to build all of these projects. The father says, “That’s a big question and I will tell you that one tomorrow.”[13] In part five, the father explains the financing of the Belt and Road Initiative.[14] Rather than use the terms “concessional loans” or “crippling debt”, he tells Lilly that the belt and road is like Lilly’s piggy bank. Only Lilly puts money into Lilly’s piggy bank, and only Lilly can take money out. The father explains that the Belt and Road is like a piggy bank. A lot of countries put money in, and they are the only ones who can take it out; however, the countries can take out more than they put in because “they build new things that help all the countries make more money to share.”[15]
Although the Chinese share Lilly’s enthusiasm for OBOR and the singing multi-ethnic children also seem to approve, the reality is that joining OBOR is not an easy decision. The LaRouche Pac video showed how the new Silk Road includes plans to cross the Bearing Straight and build US infrastructure including maglevs, high speed rails, and nuclear power plants.[16] It would seem that any one of these constructions is already a major decision which require an assessment of feasibility and needs-analysis research before undertaking them. Does the US need or want high speed rails or more nuclear power plants? If the US does decide it needs such infrastructure upgrades, does it need to borrow money from China or have the projects built by Chinese construction companies?
Other countries are also asking similar questions, mainly, are these infrastructure projects of more value to locals or of more value to China? Thailand put the brakes on a Chinese built railroad which was planned from Kunming to Singapore. The Thais decided that they needed only a portion of the project and that they would finance it themselves.[17] Another project of questionable value to locals is a second Central American canal planned in Nicaragua. Shipping industry experts say a second canal is not needed. Additionally, the canal is to be built extra-large in order to accommodate new cargo containers; however, these are not commonly used yet and the need for them in the future seems limited. Furthermore, local people are protesting the project because their land has been taken and because Central America’s largest freshwater lake, Lake Nicaragua, is being damaged.[18] These are just a few of the potentially unneeded or even unwanted infrastructure projects China is building along OBOR. Not only are these projects adversely impacting the country physically, they can be detrimental to domestic business activity. These projects are largely being built by Chinese state-owned companies, with local companies being crowded out and deriving no benefit from the construction within their own country.[19]
Another major issue with the OBOR projects is the terms of financing. The Times of India warns that OBOR may lead South Asia, as well as other countries, into a debt trap, citing the example of Sri Lanka which is already overburdened by debt resulting from accepting Chinese concessional loans. The interest rate on Sri Lanka’s Chinese loans is 6.3% while loans from the World Bank would only fetch .25-3%. As a result of Sri Lanka being unable to keep up with its payments, the Sri Lankan government has converted some of this debt into equity, allowing Chinese firms to control 80% of the Hambantota port for a period of 99-years.[20] Similar arrangements are being made for the country’s Mattala Airport. The Times warned that giving up control of such important transportation infrastructure is a threat to national security.
Another regional project which has The Times concerned is The China-Pakistan Economic Corridor (CPEC), a portion of OBOR connecting China’s Xinjiang Province with the Pakistani port of Gwadar. CPEC is projected to result in $50 billion of debt, which is estimated to take Pakistan 40 years to pay off.[21] Just like in Sri Lanka, Pakistan’s debt contract could ultimately result in a transfer of local assets to Chinese ownership. This is why Pakistani critics are referring to CPEC as “the new East India Company”,[22] evoking images of Pakistan’s colonial past and loss of sovereignty under the British. Pakistanis who oppose CPEC say that most of the economic benefits will accrue for China while all of the debt will belong to Pakistan.
The Economist echoes some of these concerns by reporting that OBOR related investment involves Chinese companies remaining in country after project completion to manage the infrastructure projects they build rather than handing control over to domestic leadership.[23]
China seems increasingly interested in making sure that OBOR succeeds. As the project requires the cooperation of countless countries, Beijing has been spinning the project, portraying it in the most benevolent and least threatening way possible, even turning OBOR into a bedtime story for children. On the surface and in the simplest terms, OBOR seems like a genius plan which will connect the people of the world, increasing cooperation and spreading prosperity. On deeper inspection, however, it appears that there are a number of disadvantages for countries which participate in OBOR, namely potentially destructive debt and an imbalanced distribution of economic benefit between China and the other countries.
In the bedtime story video, five-year-old Lilly told her father that she wished everyone understood OBOR as well as she did, because then they would definitely go along with it. Apparently, neither Donald Trump, nor a lot of people in India, Pakistan, and Thailand understand OBOR as well as a five-year-old.
References
[1] Children from Belt and Road countries sing out their gratitude
https://www.youtube.com/watch?v=H6Adz_arAYE
[2] Peter Wong, How China’s belt and road is transforming ASEAN, South China Morning Post, January 8, 2017
[3] Carrie Gracie, China’s big push for its global trade narrative, BBC News, may12, 2017
http://www.bbc.com/news/world-asia-china-39880163
[4] SCMP, ‘Belt and Road’ for kids: Are these videos China’s latest bid to win over young Western generation?, South China Morning Post, May 12, 2017
[5] LaRouche Pac, The Belt and Road Initiative: The Defining Project of our Century
[6] LaRouche Pac, The Belt and Road Initiative: The Defining Project of our Century
[7] SCMP, ‘Belt and Road’ for kids: Are these videos China’s latest bid to win over young Western generation?, South China Morning Post, May 12, 2017
[8] Children from Belt and Road countries sing out their gratitude
https://www.youtube.com/watch?v=H6Adz_arAYE
[9] Peter S. Goodman, In Era of Trump, China’s President Champions Economic Globalization, January 17, 2017, The New York Times
[10] Carrie Gracie, China’s big push for its global trade narrative, BBC News, may12, 2017
http://www.bbc.com/news/world-asia-china-39880163
[11] The Belt and Road belongs to the world – “Belt and Road Bedtime Stories” series episode 1
https://www.youtube.com/watch?v=uKhYFFLBaeQ
[12] The Belt and Road belongs to the world – “Belt and Road Bedtime Stories” series episode 1
https://www.youtube.com/watch?v=uKhYFFLBaeQ
[13] The Belt and Road belongs to the world – “Belt and Road Bedtime Stories” series episode 1
https://www.youtube.com/watch?v=uKhYFFLBaeQ
[14] China Daily, ‘Belt and Road Bedtime Stories’ Episode 5, China Daily, May 13, 2017
http://www.chinadaily.com.cn/beltandroadinitiative/2017-05/13/content_29333251.htm
[15] China Daily, ‘Belt and Road Bedtime Stories’ Episode 5, China Daily, May 13, 2017
http://www.chinadaily.com.cn/beltandroadinitiative/2017-05/13/content_29333251.htm
[16] LaRouche Pac, The Belt and Road Initiative: The Defining Project of our Century
[17] The Economist, Our bulldozers, our rules, The Economist, The Economist, July 2, 2016
[18] Lily Kuo, Why is a Chinese tycoon building a $50 billion canal in Nicaragua that no one wants?, Quartz, June 17, 2015
[20] Dipanjan Roy Chaudhury, China may put South Asia on road to debt trap, The Times of India, May 2, 2017
[21] Dipanjan Roy Chaudhury, China may put South Asia on road to debt trap, The Times of India, May 2, 2017
[22] Syed Irfan Raza, ‘CPEC could become another East India Company’, October 18, 2016
https://www.dawn.com/news/1290677
[23] The Economist, Our bulldozers, our rules, The Economist, The Economist, July 2, 2016
Good article Antonio – I hope the project skips Lake Nicaragua and stays in the Asian and central Asia area for now. That lake now is more valuable than ever. Hopefully it will benefit those landlocked countries and show some economic growth. I am more than extremely worried about the Fukushima melt down, whereas the Pacific ocean will be a dead zone and impact the Russian/ Chinese Asian venture. I believe that the is was no accident, being from Alaska, I know what a 9.0 quake should do to the infrastructure and didn’t see it in any videos of the pre-tsnami ! And no one seems to be writing about this much. If the Alaskan fisheries fail – then the whole west coast to Chile will die off too.
We’re paving new roads, building more ports, finding new options with friends of all sorts; it’s a culture exchange, we trade in our wealth, we connect with our hearts, it strengthens our health.”[
No doubt international connectivity will improve BUT in case so much debt ridden become the countries involved then joining this venture be left to the discretion of the countries concerned. This aspect be considered thoughtfully and not emotionally.