Political Economic Perspectives of China’s Belt and Road Initiative

Reshaping Regional Integration

Christian Ploberger

• Publisher: Routledge
• Year: 2019
• Print ISBN: 9780367181291
• eBook ISBN: 9780429594991
• Edition: 1
• Topic: Economics
• Subtopic: Economic Theory
• Index: Economics

The book begins with an overview on China's Belt and Road Initiative, highlighting its complex character as a domestic and international development strategy, and offering an up-to-date evaluation of it.

In response to this complexity, the book attempts to highlight the Belt and Road Initiative's double character and how it will address primary domestic development challenges that the Chinese government is facing by adding an international focus to a domestic development strategy. This in turn supports the understanding of China's political-economic policy and strategy formulation by reminding that supporting China's domestic development is still the primary task of its government. Even as the domestic aspect of the Belt and Road Initiative is highlighted, its regional and international relevance cannot be ignored either. The Belt and Road Initiative will support a continuation of the persisting debate about the impact that China's rise generates, and to what extent China can be characterised as a satisfied status quo power or a dissatisfied, revisionist power.

In this context, the book draws attention to the various impacts that the Belt and Road Initiative generates in different regional settings. However, the book also identifies some of the limitations that China's Belt and Road Initiative encounters, despite the seemingly convincing economic goals it offers, and explains why a few of the countries, like India, are resisting the lure.

1
Introduction and overview

The challenge of grasping the Chinese government’s ‘One Belt – One Road’ strategy begins with its name, as different descriptions exist (such as the ‘Silk Road Economic Belt and 21st Century Maritime Silk Road’) as do different abbreviations (such as ‘OBOR’ or ‘BRI’). Since BRI now seems to become the rather accepted form for ‘Belt and Road Initiative’, it will be used in this book as the relevant abbreviation. Even if the description already indicates a kind of puzzle, describing its character offers an even greater challenge, as a wide range of related topics can be identified, such as: Does BRI signify a regional or geo-economic strategy, China’s new grand strategy, or a national strategy to support development within China’s remote and borderland areas? Or does BRI indicate China’s challenge to the established international and political-economic architecture characterised by American and European interests? This latter aspect is associated with the enduring debate to what extent China is transforming from a rule follower to a rule maker in international politics, from a status quo power to a revisionist power. If the BRI is implemented fully, it will certainly increase China’s regional and international influence and, as the document of China’s National Development and Research Commission (NDRC), which does have government authorisation on the BRI highlights, the BRI will not only lead to a deeper integration of China into the world economic system but will also indicate that China is ready and willing to shoulder more global responsibilities and obligations, according to its capacities (Vision and Action 2015).

The enduring imagination of the memory of the ancient Silk Road also recalls various examples of past undertakings, which also offer a reference to the Silk Road metaphor to support more recent political-economic strategies, and to address development strategies, within the vast area of Central Asia. Some of them are the UNESCO project, ‘Integral Study of the Silk Road: Roads Dialogue’, which started in 1988; a UN Development Programme–backed ‘Silk Road Revival Plan’, which was launched in 2008; the Japanese government’s diplomatic efforts, described as ‘Silk Road Diplomacy’ in 2004; the American government’s ‘New Silk Road Initiative’ in 2011, which, however, should be viewed mostly in the context of the ongoing operation in Afghanistan and how to sustain US operations there;¹ and the Kazakhstan government’s announcement of a ‘New Silk Road’ strategy in 2012. In addition, there are also regional development programs which are sponsored by the Asian Development Bank (ADB), such as the Central Asia Regional Economic Cooperation Program, with a focus on transport, trade, and energy, or Russian strategies of trying to maintain close political-economic cooperation with the countries of Central Asia. Seen in this context, China’s BRI neither was the first nor the only conceptual framework to engulf the Eurasian context, though it may be the most comprehensive one. Following such conception of space and historical context of the Silk Road metaphor, this book will address the regional context of the BRI by focusing on Central Asia, Southeast Asia, and South Asia; it will not include the part of the BRI which focuses on Africa.

On an abstract level, the BRI represents a transcontinental development strategy China initiated with a focus on supporting regional interconnectivity. However, the BRI also signifies the success of the Chinese reform process and that China has become a leading country at the global level. Indeed, the BRI is an indication of China’s new-found economic strength and global political role. From its geographic focus, the BRI encompasses locations which have already been within the Chinese government’s focus of interest for a considerable period of time, such as Southeast and South Asia, Central Asia, and Europe. Therefore, it seems to provide a political-economic framework to address related topics of closer cooperation of different geographic settings within a particular framework. Following such a line of consideration, one may understand the BRI as an umbrella of existing political-economic interests for the Chinese government. Trying to increase China’s political-economic role in different regional settings consequently raises questions about the geopolitical and geo-economic impact this may generate on different regional settings. For sure, if the BRI is successful and comprehensively implemented, it would lead to a re-orientation of a good part of the global economy by generating a new political space based on the Eurasian continent. However, for the time being, we are quite far off from such a scenario, and the prospect for generating such an alternative political and economic space remains rather slim. Implementing the various infrastructure projects successfully would constitute a first but important step in such a direction.

At the same time, the BRI also inherits some limitations in its regional and global outlook, as it does not say much about the China-US or China-Japan relationship, nor does it address critical security challenges, such as that of the Korean peninsula. Even so, the BRI does represent one of China’s vital foreign policy strategies by offering a framework for integrating various major aspects of its foreign affairs. Even so, one can characterise the BRI as one of China’s central foreign policy strategies. Yet, this still would not be sufficient to describe entirely China’s position, as this definition of the BRI would ignore China’s domestic aspects, from a Chinese perspective, to address the economic imbalance we can identify among China’s provinces, and would lead to a greatly misinterpretation of the BRI’s nature. Once again, this would highlight the complexity of its character. A vital point not to be overseen is that China is still at a stage in which its development process should not be taken for granted; even exceptional success has already been achieved in both absolute and relative gains.

Even as China can rightfully celebrate 40 years of a successful reform process, in transforming a backward-looking country to one of the leading economic nations today, it still faces various development challenges, such as an increasing prospect of inequality in development between urban and rural areas and between provinces, and a continuing disadvantage of borderland areas. Even if geographic location represents an important factor, some of the underlying dynamics of this process of unequal development may even have been propelled by the reform process itself. In recognising this political-economic challenge, the Chinese government tried in the past to address this imbalance in development within China and continues to do so. Various economic and political strategies were adopted in the past but with rather mixed results, such as the ‘Go West’ strategy of the late 1990s and early 2000s, which should have supported a shift in investment and with it development from the eastern coastal areas towards the western parts of the country, including borderland areas, such as Xinjiang and Yunnan provinces. The strategic aim of such policy proposals was to address the geographical disadvantage those areas endured; yet those goals were only partially reached, and the disadvantage of the borderland areas continues today.

By taking into consideration China’s continuous challenge in developing and in addressing an increasing imbalance in development, any major political-economic strategy the Chinese leadership formulates, even when it appears to have an overwhelmingly international character, would require addressing those domestic development challenges. It is worth remembering that supporting China’s primary goal of development represents the utmost target for the Communist Party of China and China’s government. Yet, at the same time, any major economic strategy should also support another long-stated national goal – that China, once again, become a strong and respected country at the global level. This strong link between domestic development and international recognition has been identified as the leading political-economic strategy since the now famous Third Plenary Session of the 11th Central Committee in December 1978. Certainly, if the BRI is implemented even partially, it will contribute to this overall strategic goal. Thus, when considering the BRI’s strong emphasis on supporting domestic development within China, in addressing the uneven provincial development process, the BRI can be rightly interpreted as a national development strategy but one with a strong international focus added.

As such, the domestic relevance of the BRI for addressing China’s own development outlook and challenges should not be ignored. This, in turn, put the BRI in a rather different perspective, when it is compared with the aforementioned geopolitical focus. However, the challenge of characterising China’s BRI is that one can find arguments for both perspectives. After all, even if the BRI is implemented only partially, it will generate a dynamic of re-arranging economic geography within the Eurasian landmass and on various regional integration processes as added incentives for regional economic cooperation are generated. Even if this may be seen as a rather remote perspective in the context of a contemporary ocean-focused global economy, it would not be unprecedented historically, since over an extended historical period in history, land-based trade existed within the Eurasian context.

1.1 Taking stock of the Belt and Road Initiative

The origin of the BRI is widely attributed to comments President Xi Jinping made in September 2013 during a state visit to Kazakhstan. Indeed, on that occasion he proposed closer economic cooperation with Central Asian countries by forming an economic belt along the historical Silk Road. He stated that it was a foreign policy priority for China to develop a close and cooperative relationship with the countries of Central Asia (Xi Jinping 2013a). At that stage, the emphasis and focus of Xi Jinping’s statement were oriented towards closer and deeper relations between China and Central Asian countries. By applying the historical metaphor of the Silk Road and by emphasising connectivity, Xi Jinping put renewed emphasis into a looser regional cooperation between Central Asian countries and China, thus supporting a regional integration dynamic. This approach on adding a renewed emphasis on a specific regional integration process also applies to Xi Jinping’s address to the Indonesian Parliament in October 2013, when he referred to the Maritime Silk Road. This time the regional context on which he was focusing was Southeast Asia or, more specifically, the relationship with the Association of Southeast Asian Nations (ASEAN). In his address to the Indonesian Parliament, the overwhelming emphasis was on strengthening China-Indonesian and China-ASEAN relations even further, by supporting ASEAN internal development and its role as a regional organisation, and by offering a closer economic and political cooperation (Xi Jinping 2013b). Even before Xi Jinping’s speech at the Indonesian Parliament, Prime Minister Li Keqiang had already made a reference to the Maritime Silk Road at the 10th China-ASEAN Expo, in September that same year. He, too, mentioned the BRI in the context of addressing regional cooperation, like the ten-year-old China-ASEAN strategic partnership, by emphasising that China and the ASEAN were facing a similar development challenge and, thus, were natural partners, consequently stressing further closer cooperation (Li Keqiang 2013).

Since then, it has become known as the BRI extended in both scope and scale, and now includes 70 countries, covering 62 percent of the global population and 30 percent of global gross domestic product (GDP) (World Bank Brief 2018). Hence, the BRI represents an ambitious undertaking of regional cooperation on a transcontinental scale, the largest initiative to improve global connectivity to date. On an abstract level, among its participants the BRI supports infrastructure developments, a closer policy coordination with a focus on development, support for trade, and closer people-to-people contact within specific regional but also transcontinental levels. Another important step in outlining the character of the BRI occurred in 2015, when China’s NDRC published an official document which had the State Council’s authorisation and outlined the BRI in more detail. The document included a comprehensive evaluation of the focus and strategies of the BRI. The main aspects are centred on five features: policy coordination, facilitating connectivity, unimpeded trade, financial integration, and people-to-people connection. Further, the document also emphasises generating mutual respect and trust, mutual benefits, and win-win cooperation. Indeed, cooperation should be encouraged through consultation so the development interests of all participating countries are realised (Vision and Action 2015).

Thus, by facilitating closer interconnectivity between the participating countries, economic development will be facilitated, as will political cooperation and regional economic integration. On various visits to Central Asia and Southeast Asia, the author of the present book experienced that interconnectivity still represents a challenge for development. Such an observation holds true even when observing the fundamental changes that are already taking place. From such a perspective, one has to support the BRI project. An excellent example of the impact on infrastructure development is the fast progress made in connecting China’s Yunnan province with Southeast Asia and with the Greater Mekong Subregion (GMS) in particular. Even so, the infrastructure challenge throughout Asia will continue for a considerable time, based on the ADB’s assessment, which points towards an existing infrastructure investment gap of 2.4 percent of the projected regional GDP for the 2016–2020 period (Meeting Asia’s Infrastructure Needs 2017). A recent World Bank report also states that one main economic challenge for developing countries is missing logistic infrastructure, as this increases the costs for companies and thus negatively impacts their willingness to invest in those developing countries (Wiederer 2018).

Hence, existing gaps in intraregional connectivity need to be addressed first and, with it, the development of core infrastructure gains priority. In turn, this gives considerable support for any undertaking to promote infrastructure development. In this regard, it is possible to identify various aspects which make the BRI an attractive option for many countries. After all, a reliable road and rail network offers considerable economic development for a country as well as for its region. Importantly, once a reliable infrastructure has been built, it will offer a connection not only to the Chinese but also to the global market, thus overcoming an economic challenge which Central Asian countries are still facing. China’s engagement with Central Asia through its BRI highlights that the BRI supports country-specific development goals, as is the case with Kazakhstan. Kazakhstan’s government has a strong focus on infrastructure development, as the previous ‘Kazakhstan 2030’ and the current ‘Kazakhstan 2050’ development strategies indicate. Besides, the 2015 Joint Declaration on the China-Kazakh strategic partnership emphasised that China’s BRI and Kazakh’s development focus complement each other and contribute to a further deepening of their relationship (Joint Declaration 2015). This position was repeated in President Nazarbayev’s 2018 state of the nation address, by pointing out that the comprehensive strategic partnership with China was gradually developing with the BRI, offering additional impulse for it. An added aspect is that Central Asian states have some desire to became more independent in their overreliance on Soviet area infrastructure, which links them strongly to Russia but offers only limited access to global markets.

Although infrastructure investment takes on a prominent role, not only as a perception, because much international attention is directed towards those infrastructure investments China has undertaken, we should not ignore that infrastructure development only represents a first step towards a closer economic cooperation among the participating countries. Yet one can rightly point out that, despite all the challenges infrastructure development may encounter, finalising trade agreements and treaties for regional economic cooperation and integration represent an even stiffer challenge. Undoubtedly, supporting a closer economic integration of various regional settings represents an essential part of the BRI and of the generation of the envisaged economic benefits. Hence, we may describe the construction of infrastructure connectivity and economic corridors as the arteries of the BRI, while the formation of closer economic cooperation will offer more substance by providing the glue for the whole integration development which underlies the BRI. This fundamental relevance of infrastructure connectivity was also highlighted during the Second Belt and Road Forum in Beijing in April 2019. In his opening address to this event, Xi Jinping (2019) emphasised that connectivity is crucial for advancing Belt and Road cooperation, and infrastructure forms the bedrock of connectivity, common development, and prosperity. The Joint Communique (2019) of the Second Belt and Road Forum also stresses the fundamental importance of transport infrastructure for connectivity and cooperation.

When taking into account the proposed economic corridors, we can start to appreciate the geographical extent the BRI is covering. To date, we can identify six economic corridors: the China-Pakistan Economic Corridor; the China-Mongolia-Russia Economic Corridor; the New Eurasian Land Based Economic Corridor; the China-Central Asia-West Asia Economic Corridor; the China-Indochina Peninsula Economic Corridor; and the Bangladesh-China-India-Myanmar Economic Corridor (BCIM-EC). Even if the corridors offer a good indication of the geographic and regional focus of the BRI, they rather symbolise a focused perspective, as focusing on economic corridors masks, to some extent, more regional and subregional attention within the BRI and, indeed, of the Chinese foreign policy, predating the BRI initiative but now being part of it. In this regard, the China-Indochina Peninsula Economic Corridor offers a good example. Although from an abstract perspective it makes sense to interpret it as a single economic corridor, such a perception is less appropriate from a more regional and subregional perspective, since it would ignore the long-established China-ASEAN strategic partnership as well as China’s specific interests on the GMS integration process. The identification of the China-Mongolia-Russia Economic Corridor and of the New Eurasian Land Based Economic Corridor provides other examples. Here again, even if an abstract description of both corridors is helpful and offers some indication of potential economic integration, a more regional perspective, with a focus on Central Asia, would propose a more distinctive interpretation of the role the BRI can take in supporting China’s position within this area. After all, China’s engagement with Central Asia is quite complex, including bilateral and regional cooperation, as well as the China-Russia relationship. Once again, those relations and the related dynamics are predating the BRI initiative. Moreover, one could argue that the BRI, to some extent, may be even developed as a response to address China’s complex political-economic interest in Central Asia and the competing interest with Russia over this geopolitical space.

Considering the BRI from a transcontinental perspective provides a comprehensive view about its dimensions. However, it is a rather abstract perspective, and as the above examples indicate, those economic corridors are based on long-established and regional-specific policy strategies of the Chinese leadership. Such reasoning supports a characterisation of the BRI as a strategic umbrella for various and long-established policies of the Chinese leadership instead of interpreting the BRI as China’s new grand strategy. The author debated this subject in an earlier paper, which represented a first reasoning of the development of this book project (Ploberger 2017). With regard to identifying the impact the BRI has already generated, China’s Ministry of Commerce has pointed out that, between January and October 2018, Chinese companies invested $11.9 billion in 55 countries which are linked to the BRI, with an upward trend, as this amount is 6.4 percent higher than the amount which had been invested the previous year (MOFCOM 2018). Another way of assessing the impact that has been generated so far for Eurasian interconnectivity is the increasing frequency of freight trains travelling between China and Europe and a diversity of destinations they are reaching in both Europe and China. For example, the number of freight trains connecting different Chinese cities, such as Chengdu (Sichuan) or Zhengzhou (Henan), with cities in Europe is increasing steadily. In the case of Chengdu, there were 1,442 trains in 2018, which represents an increase of 117 percent over the previous year (Belt and Road Portal 2019a). In the case of Zhengzhou, which is located in central China, the number reached 752 trains, which indicates an increase of 50 percent over the previous year, with transported goods weighting 350,000 tons and a combined value of $3.2 billion (Belt and Road Portal 2019b). Additional methods allow assessing the increasing relevance the BRI has achieved so far. A recent World Bank report points out that the significance of the countries which are linked to the BRI as a group has increased in global trade, as their share in global export has risen to 37 percent in 2015 while their share in global imports has increased to 21 percent. Further, their intragroup share of exports has grown to 44.3 percent in 2015 (Boffa 2018). Considering this and future potential economic impacts, the prospect that the BRI will contribute to more global trade cannot be ignored.

As Baniya et al. (2019) re-emphasised in another recent Worl...

Table of contents

• Cover
• Half Title
• Series Page
• Title
• Copyright
• Dedication
• Contents
• List of figures
• List of abbreviations
• 1 Introduction and overview
• 2 The Belt and Road Initiative in the context of China’s rise
• 3 The Belt and Road Initiative in the context of China’s reform process: addressing the challenge of domestic development by supporting transborder cooperation
• 4 Cooperation required: reluctant partners, countries with a second thought, and disunity within the European Union
• 5 Regionalism, regionalisation, and the Belt and Road Initiative
• 6 Conclusion
• Bibliography
• Index