Nadège Rolland on the Potential Backlash against the Belt and Road Initiative

Nadège Rolland is Senior Fellow for political and Security Affairs at the National Bureau of Asian Research (NBR), an independent think-tank based in Seattle and Washington, D.C. Her research focuses mainly on China's foreign and defense policy and the changes in regional dynamics resulting from the rise of China. Drawing on her twenty years of experience as a French government official, she also examines the prospects for transatlantic cooperation in research and policy related to Asia. Prior to joining NBR, Ms. Rolland was an analyst and senior adviser on Asian and Chinese strategic issues to the French Ministry of Defense (1994–2014). She is the author of the book China's Eurasian Century? Political and Strategic Implications of the Belt and Road Initiative (2017). Ms. Rolland is a graduate of the National Institute of Oriental Languages and Civilizations (MSc Chinese Language and Contemporary Chinese Studies, 1994) and of the S. Rajaratnam School of International Studies (MSc Strategic Studies, 2007); she is also a National Taiwan Normal University alumna (1994).

On March 6, then-U.S. Secretary of State Rex Tillerson criticized China's Belt and Road Initiative (BRI) as debt-trap diplomacy, warning African countries of "opaque contracts, predatory loan practices, and corrupt deals" that might undermine their sovereignty. To what extent do you think Tillerson has a valid worry?  Is his concern widely shared?  Are there examples validating the “debt trap” claim?

I think Secretary of State Tillerson made that remark after Sri Lanka gave a 99-year lease to China over its Hambantota Port. In December 2017, the Sri Lankan government gave that lease to China because it has about a 8-billion debt to China. That stirred a lot of controversy and worries that China would undermine the sovereignty of those countries. The Center for Global Development has recently published a report that analyzes the debts to China that will be incurred by nations that are participating in the BRI. It found that eight nations will be very vulnerable to debt because of the BRI, including Djibouti, Kyrgyzstan, Laos, Maldives, Mongolia, Montenegro, Pakistan and Tajikistan. If you look at the past behaviors of China, sometimes it has forgiven the debt of some countries, but sometimes it demanded some controls over either infrastructure or natural resources as compensation for the money owed to Beijing. That’s what we call “debt for equity swap”. For example, it happened in Venezuela, where the Venezuelan government was not able to repay its debt owed to Beijing, so Beijing asked that it get the oil exported by Venezuelan as a form of repayment. There are the current examples of debt traps related to China, and there could be more in the future. For example, in Laos, the China-Laos railway that is going to cost $6 billion dollars, which is more than half of Lao’s 2015 GDP. You can imagine the burden put on those countries. In Pakistan, the agreement around the Gwadar Port says that over 90 percent of the revenue that’s going to be generated by the port activities will go to China for the next forty years.  That’s where concerns are emerging now. I think the former secretary of state was right that this was a concern. As for whether it is widely shared, I think there is an increasing awareness that this is going to be an important part of the Belt and Road, but how to address it is another question.

China argues that the positive impact of the BRI includes massive investment and enlarged growth potential. Is there evidence to support China's claim?

So far, it’s still very early to say because the Belt and Road was announced in the late 2013, and it took a while to start to put in place some projects. These are mostly infrastructure projects, and they are very complex projects to put in place. It’s still early to say what kinds of positive impact it would have on the growth of recipient countries. Some figures have shown China has not invested so much in those countries other than giving loans and offering contracts. Basically, the Chinese assistance does not really appear to be conducive for economic growth because the Chinese policy banks fund Chinese contractors to undertake projects overseas. Since the Chinese policy banks fund only Chinese enterprises with Chinese contractors and Chinese workers abroad, the relative impact for local growth is probably very small. As there is not so much other investment or contracts, the impact on the local growth might be marginal. There is hope, though, that the impact would be positive for China’s own economic growth. That’s part of Beijing’s incentive for the BRI because this would create economic growth back at home, but not so much in recipient countries.

It is argued that the BRI is a part of China's scheme of "neocolonialism," as one potential motive of the initiative is to export surplus of China's domestic production, a similar factor that drove colonialism in the past. Regardless of China's motive, how does the BRI complement China's grand strategy?

Lenin once said if you export your capital, in the end, you will become an imperialist power. I don’t think China wants to be a neocolonialist in the sense western powers did in the 19th century. I don’t think China wants to have territorial or military control over parts of territories around the world.  What China wants is to gain some access to natural resources, such as oil, gas and minerals. Also, it wants to increase its access to emerging markets to be able to ship more manufactured goods to these emerging markets. As whether that would transform China as a neocolonialist power, this is not so clear. In the end, the Belt and Road is really thought of as a grand strategy in the sense China wants to use its economic power to be able to increase its political influence over those countries that are neighbors of China. I doubt whether that would morph into military assertiveness, but certainly, it will evolve into its political influence. We can see how China uses its economic power as the incentive to garner some influence in those countries, but also as a coercive instrument if some countries don’t abide by China’s own interests. We have seen many different examples of China’s past, in which it used its economic power to punish Norway, for example, after Liu Xiaobo was awarded the Nobel Peace Prize.  China has done similar things to Nepal,  the Philippines and, more recently, South Korea.  When South Korea agreed to deploy a U.S. anti-missile defense system, China embargoed some imports from Korea and reduced Chinese tourism to South Korea. So that’s really the big power China has now: the access to its market. How is it going to influence those regions? It remains to be seen in the future, but one of the drivers is absolutely to gain more influence over these broad regions.

Occasionally, there was news about complaints or protests against BRI projects for legal, local employment, or environmental reasons. Nevertheless, China claims that China and countries involved in BRI have common goals of maintaining social stability and creating growth. How widespread is the current discontent toward the BRI?

It has to be seen on a case by case basis. It really depends on the country. It’s true in many of the countries, projects that are related to construction, energy, and transportation have a definite impact on local residents. For example, back to the example of China-Laos high-speed railway.  It is supposed to link China through the South East Asian Peninsula, Laos, Thailand, Malaysia and Singapore. More than four thousand families have been affected by this project. There is also some forest and farmland damage, and people have been expelled from their properties, and so there is an immediate impact on the lives of the local community when you want to have a high-speed railway, or when you want a pipeline going through the land. Other examples have been related to hydroelectric power dam in Pakistan, Nepal and Myanmar. There is some countervailing and local discontent, of course. But it all depends on which country where we are looking at. In Laos, for example, the families that have been expelled from their properties don’t really have much weight to go against the government. There are proposals of financial compensation for the loss of their properties and farmlands. But how that’s going to be realized, I’m not so sure. Moreover, I think the backlash might come from the governments themselves. For example, Bangladesh in 2015 entered some negotiation for the Matarbari port under the Belt and Road. The financial conditions offered by China were so unacceptable that they turned to Japan instead to help with the financing. The local discontent is quite important, but on the other hand, most of the countries in the Belt and Road are weak democracies or authoritarian countries, so the local people don’t really have their say. It’s the government imposing their will on the local population. That will come as a cost to the people themselves.

Does the local discontent have any potential to undermine some projects or even relations with China?

Yes but it is ultimately related to both the financial and diplomatic relations at the government level with Beijing. If a country is in a good relation with Beijing and doesn’t want to put its relation with Beijing in jeopardy because of local farmers and local fishermen, I think the impact is not going to be big on the bilateral relation. Many of the things that are going on the ground are not known to the wider public. There is not so much research done on those environmental impact, or the impact on the local population. It depends on how the local governments are willing to listen to the worries of their population and balance their relationship with China.

Given its own current debt level, it is worried that whether China can finance the BRI without undermining its own financial stability. How will China's domestic economic situation affect the prospect of the BRI?

This is an important question as well. The Chinese domestic debt has been increasing very rapidly. The loans China gives away under the Belt and Road might further burden China’s own domestic debt.  One of the ways China is now trying to alleviate its burden is to spread the financial burden among other donors. For example, the China-led Asian Infrastructure Investment Bank is working a lot with the World Bank and other international lenders and financial institutions to fund some projects. There are also some appeals to work with the Japan-led Asian Development Banks (ADB). So that could be a way for China to spread its financial burden so that it does not cause a backlash to its own financial situation.

China and countries involved in BRI need to address the issue of security and law enforcement. It is argued that Eurasian integration could make it easier for criminal entities to operate. In addition, there is also concern about terrorist activities in areas where BRI will reach, especially the China-Pakistan Economic Corridor and the pipeline route from Kashgar in Xinjiang to eastern China. Is the Chinese government and its partner nations doing anything to mitigate the potential of crime and terrorism?

Yes, I think this is concern that’s been taken very seriously in Beijing. China’s options are now relatively limited, so the discussion in the Chinese security community focuses on how to coordinate and better cooperate mostly within the Shanghai Cooperation Organization framework. Because this is an organization that has an anti-terrorism component that’s working already, and China cannot do anything regarding counterterrorism just by itself. It is cooperating with Russia, countries in Central Asia included in the SCO, and Pakistan to better exchange intelligence data and probably have more anti-terrorism joint exercises. There are also emerging groupings at the regional level - between China, Afghanistan, Pakistan, and Tajikistan, for example – that are focusing on counter-terrorism. Finally, China is also partnering with Pakistan at the local level to protect the projects along the China-Pakistan Economic Corridor. There is a 15,000-men force that has been devoted especially to the protection of the corridor by the Pakistan military forces. They are supposed to make sure the projects are not under attack, and to protect Chinese workers who are working on projects in Pakistan. There are also emerging solutions for Beijing to secure the Belt and Road and to guard it against terrorist activities.

William Shi CMC '20Student Journalist

Gwadar Port of Pakistan by Umargondal on July 9, 2016. Image via Wikimedia Commons.


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