The word silk was derived from the ancient Greek word serikos, pertaining to the East Asian people from whom the Greeks received silks.
Proposed in 2013, China’s Belt and Road Initiative (BRI) is a historically large infrastructure plan between 65 states, seeking to develop international overland and maritime trade networks. Beijing’s motivations can be seen in China’s return to global influence following ruin in the 19th and 20th centuries. Supporters of this foreign policy see Beijing developing mutually beneficial infrastructure in developing countries with generous finance terms. Critics see the Belt and Road as a threat to the economic independence of developing states through over-leveraging. Further, Australia’s commodity market may be at risk from increasing global supply made possible by the BRI.
The BRI loans to high risk states with very low interest rates, mostly between 1-2%. These terms are generous as these states can develop infrastructure elemental for economic development without previous expensive financing. However, as with any financial institution, China requires collateral on these loans to insure their investment. Mike Pence has accused China of luring vulnerable nations into debt-diplomacy, yet many have aimed to debunk this sentiment such as The Atlantic and The Lowy Institute. These cite such anti-Chinese sentiment as propaganda.
The Sri Lankan government handed over the Hambantota port built with Chinese loan money they were unable to pay back, along with 15000 acres of land surrounding it, for 99 years in December 2018. Many accused China of signing off on loans Sri Lanka could never repay. Further, Beijing’s acquisition of a strategic maritime asset in the Indian Ocean raised security concerns for rival power India.
The China-Pakistan Economic Corridor (CPEC) is a USD$62 billion project which hopes to give China faster access to the Indian Ocean and European consumer markets via Pakistani overland railways and highways. While only 20% of CPEC is debt-based finance, it is projected that at the end of this financial year, Pakistan’s debt to China will be USD$14 billion, with Islamabad’s reserves only USD$18.5 billion as of 2020.
The Solomon Islands’ decision to join the BRI in 2019 cajoled the nation to de-recognise Taiwan’s sovereignty, the state who has contributed USD$460 million in Solomon aid over the last 36 years. This has led to unrest in the capital Honiara, and upset locals whose economic lifeline from Taiwanese employment has been pulled out beneath them, exacerbating ethnic tensions in the region.
Victorian Premier Daniel Andrews signed the state onto the BRI in 2018 to increase Chinese trade volume. The federal government scrapped the agreement, citing incongruences with Australia’s national foreign policy objectives and raising national concerns. This followed a politically unpopular lease of Darwin Port to China in 2015. Canberra’s decision provoked a “strong displeasure and resolute opposition” within the Chinese government, further deteriorating an eroding bilateral relationship.
This may be bad news for Australia’s market share of commodities, as Australia’s 2020 GDP comprised around 8.5 percent of Chinese goods exports, mainly iron ore.
Guinea joined the BRI in 2017. The West-African state’s Simandou hills are home to one of the largest untapped, high-grade iron ore sources in the world. Should Guinea succeed in developing their infrastructure through Chinese financial assistance, the nation will be a leader in iron ore exports among Australia, driving down the global price of the commodity and cutting Australia’s mining income.
What are Xi Jinping’s intentions with this monumental plan? Building infrastructure will assist in shortening shipping times and costs, as seen in the CPEC and Sri Lankan cases. Yet the primary economic objective of Beijing may lie in investments in developing countries like Guinea accessing new cheaper commodity supplies in future. This will significantly reduce Chinese manufacturing costs and cement their international competitiveness relative to their emerging manufacturing competitor India.
Chinese global influence was revived in the 20th century following Deng Xiaoping’s economic reform in the late 1970s. By opening China’s economy to the outside world, previously secluded under Maoist protectionism, companies swarmed to China to use relatively cheap labour. The resulting economic growth of China is an economic fairytale, as over 800 million Chinese have been lifted out of extreme poverty. The Chinese GDP was US$150 billion in 1978: it is now US$14.2 trillion, second to only the US.
However, this recent prosperity is preceded by China’s Century of Humiliation. The Opium Wars of the 1800s, domestic rebellions and the Japanese annexation of the Korean peninsula crumbled Dynastic China. The Early 20th Century featured the Rape of Nanking by Imperial Japanese invaders and a brutal civil war won by Mao Zedong, only for economic mismanagement to cause one of the largest famines in human history.
Despite economic and geopolitical ascension, the CCP’s wounds remain fresh. The Belt and Road Initiative is motivated by China’s desire to reclaim its prosperity and influence.
While sceptics have deemed the BRI to be coercive, developing nations have never had better loan terms, and many BRI partnerships could be mutually beneficial. Regardless of morality, Australia’s fragility has been made apparent with the possibility of new export competition, yet geopolitical concerns surrounding the BRI’s national security impediments often supersede economic rationale.
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- Did Scott Morrison have “no authority” to approve or reject the lease of the Port of Darwin? (2022, March 7). ABC News. https://www.abc.net.au/news/2022-03-08/fact-check-scott-morrison-port-of-darwin-china-landbridge/100888740
- Morrison government quashes Victoria’s BRI deal with China. (2021, April 22). The Strategist. https://www.aspistrategist.org.au/morrison-government-quashes-victorias-bri-deal-with-china/
- Where next for Guinea’s giant Simandou project? (2022, March 31). African Business. https://african.business/2022/03/energy-resources/where-next-for-guineas-giant-simandou-project/
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