The Hindu Business Line
Perils of China’s ‘Belt and Road’ initiative
Using ‘aid’ as leverage, China is slowly exploiting developing nations and establishing its dominance in the Indian Ocean
One of the most remarkable developments in recent decades has been the rise of China, spearheaded since 1978, by the visionary leadership and economic reforms of Deng Xiao Ping. China registered the highest rate of economic growth in history, growing at an average rate of 9.5 per cent annually, for over three decades. This followed the earlier rise of Japan between 1950-1989, with an average annual rate of growth rate of 6.7 per cent.
Deng transformed a country crippled by centralised planning and state control of industries, into a more decentralised economy, with increasing involvement of private initiative. This era saw market reforms leading to a surge in exports, with China emerging as the largest exporter in the world. China’s private sector today controls around 80 per cent of its industry and virtually the entire agricultural sector. State farms today, employ barely 1 per cent of agricultural labour.
There are 658 billionaires in China, which is ruled by a “Communist” Party, as against 584 in the US, ruled by Trump’s rightwing Republican Party!
President Xi Jinping has now emerged as China’s unquestioned leader, seeking to match the earlier pre-eminence of Deng Xiao Ping. Among Xi’s “mantras” to achieve his ambitions is the now famous ‘One Belt One Road’ (OBOR) project, involving the use of Chinese construction companies, which have huge surplus capacities, in projects abroad. These companies did a stupendous job in China over the past three decades.
They now have the surplus capacity, including labour and machinery, arising from the relatively small number of construction projects, yet to be undertaken in China.
President Xi’s ‘Belt and Road’ initiative is not only involved in building roads and bridges but also railways, ports, dams, power stations and other infrastructure projects across 68 countries, spanning Asia, Africa and Europe. Estimates of total investments envisaged for these projects vary from $1 trillion to $1.3 trillion. The primary focus is on the Eurasian landmass. The main source of concern in India, however, pertains to Chinese projects across the Indian Ocean.
While the OBOR focusses primarily on the construction of roads, bridges, electrical power projects and dams, the terms for such assistance are opaque. Moreover, relatively little attention is paid to developing indigenous skills and capacities for operations and maintenance. The terms of interest and repayment are far less generous than the vastly concessional assistance/aid provided by institutions like the World Bank and Asian Development Bank, or bilaterally by countries like Japan and Germany.
Falling for inducements
The net result of this Chinese “generosity” is that a number of developing countries, beguiled by Chinese protestations of altruistic assistance, soon find themselves handing over substantial tracts of territory and natural resources to the Chinese, with little development of indigenous skills and expertise.
There is very limited transparency in Chinese “aid.” Moreover, there are cases of ruling elites across Asia and Africa falling prey to Chinese “inducements”.
India’s western Indian Ocean neighbourhood, in an area extending from Djibouti and Mombasa on the shores of East Africa, There’s more to China’s infra push than expanding trade
to Gwadar in Baluchistan and to Hambantota and Colombo, in Sri Lanka, remains its primary source of concern about Chinese intentions. Using its “aid” as leverage, China has secured its first military base in the East African Port of Djibouti. China has, in turn, undertaken work on port facilities, construction of two airports and a rail line, from Djibouti, across landlocked Ethiopia.
In neighbouring Kenya, China’s involvement in the strategic port of Mombasa and construction of a railway line linking the port to the capital Nairobi, have also raised eyebrows internationally. There are growing apprehensions in Kenya that it would soon be unable repay its debts to China and be forced to make “concessions”, on the management and use of Mombasa port. China is the largest lender to Kenya, with debt liabilities reportedly amounting to around $42 billion
Closer to India, reckless spending by the government of former President Abdulla Yameen in Maldives,
has resulted in the island nation, with a population of 4 lakh and a GDP of $4.9 billion, acquiring a debt of $3 billion, on account of the usual Chinese infrastructure mix of roads, bridges, airports and housing. The newly elected government of President Ibrahim Solih has been more circumspect about such projects getting the country into a Chinese debt trap and being forced to mortgage its crucial security interests.
This is an experience which Sri Lanka also faced, when, unable to repay its debts, it was forced to concede substantial control of the Hambantota Port, with a 99-year lease of the Port to China. Colombo was then also compelled to allow Chinese nuclear submarines to berth in Colombo.
Pakistan and Myanmar are inevitably going to experience similar dilemmas in coming years. The $62 billion “China Pakistan Economic Corridor,” involves road, rail, mining, port, power sector and agricultural projects, under conditions, which have not been made known transparently, even to Parliamentary Committees and the country’s central bank.
With its foreign exchange reserves dwindling to $6-8 billion and its pleas for an IMF bailout dependent on the goodwill of the US and its allies, Pakistan is faced with very difficult choices on economic management and its backing for groups like the Taliban and the Jaish-e-Mohammed, in coming months. Apart from developing and virtually taking over the Gwadar Port in Baluchistan, China is all set to build up Pakistan’s navy with the supply of four of its “most advanced” warships and eight advanced attack submarines, by 2028. At the same time, an isolated Myanmar faces virtual Chinese blackmail to accept Beijing’s “aid” to build a highly unpopular and ecologically dangerous hydroelectric project, in the face of strong public protest.
This project is to be part of a Chinese “economic corridor,” linking its Yunnan Province, with Myanmar’s Bay of Bengal Port of Kyaukpyu.
China’s ‘One Belt One Road’ project obviously has multiple aims. India cannot, however, overlook the obvious fact that the project is geared to establishing Chinese domination of vital lanes of communication and oil supplies in the Indian Ocean.
Responding to India’s concerns voiced over two decades ago, a Chinese Admiral arrogantly remarked: “The Indian Ocean is not India’s Ocean”. China’s aim of dominating the vital sea lanes of communications across the Indian Ocean have serious implications for the maritime security of not only India, but several of its partner States, ranging from the US and Japan to Indonesia, Malaysia, Vietnam and South Korea.
The writer is a former
High Commissioner to Pakistan