Expansion of Chinese capital, technologies, goods and services under the common brand of the Belt and Road Initiative is the hottest topic in the global community. With this initiative, China is drawing Eurasian and African countries into the orbit of its geoeconomy.
The true motives behind the general objectives of the project — such as political coordination, interconnected infrastructure, liberalization of trade, free flow of capital and stronger understanding between peoples (the vision and action to promote joint construction of the Economic Belt of the Silk Road in the 21st century), are China’s ambition to tackle its domestic issues (development of western provinces and ensuring social equality, strengthening energy security, export of Chinese industrial capacities, avoiding the trap of median income and ensuring the legitimacy of the Communist Party of China) as well as external challenges (developing new sales markets for Chinese goods and services, counterbalancing the foreign economical influence of the United States, alleviating common threats and ensuring security with bordering countries, and conquering strategic space in the West).
It should be noted that the Belt and Road Initiative is moving forward rather fast. China has signed cooperation agreements under the initiative with 140 countries and 31 international organizations (as of January 30, 2021). Many energy and transport infrastructure facilities of the China‒Pakistan corridor and the China — Central Asia — Western Asia corridor are finished or nearing completion. At the same time, China has been dealing with the protracted process of approving planned facilities which are often not cost-effective economically or socially. The cost estimates of the facilities under construction are often exaggerated. Another problem slowing down the implementation of these facilities lies in the specifics of China’s current financing model for large investment projects which, to a large extent, serves the interests of China rather than other participating countries as it implies that the entire project or its significant part will be handed over to Chinese contractors, with Chinese subcontractors, Chinese technology and workforce involved.
Developed countries such as the United States, Japan and the European Union are extremely cautious about the Belt and Road Initiative as they understand that its main purpose is to elevate China and help it win leading positions in the world and extend its influence to the Eurasian continent, Africa and Latin America.
The developed countries are not willing to give in. Specifically, the United States and Japan in the Asia-Pacific Region, Europe and Africa are intensifying their trade and investment cooperation by proposing new investment projects and providing all sorts of financial help to these countries. In response to China’s stronger presence in Central Asia, in 2019 the US Department of State released a new strategy on Central Asia for 2019—2025. The European Union is developing its own trade and investment plan in Africa, to successfully compete with the Belt and Road. In attempts to at least maintain the current level of influence, in September 2018 the EU announced providing 40 billion euros in aid between 2021 and 2027.
Knowing that it would be hard to resist China’s financial power alone, the United States and its G7 partners agreed to launch a new global initiative, Build Back Better World. The initiative worth over $40 trillion and aimed at reducing needs and developing infrastructure in developed countries became particularly relevant due to COVID-19.
Active foreign economic counteraction of individual countries can, however, only slow down the project’s fast advance. The challenges arising during its implementation are largely compensated by the project’s advantages and new opportunities it receives as well as China’s more flexible approach to the participating countries.
By Yelena Yegorycheva, expert, Faculty of Economics, Peoples’ Friendship University of Russia