Rehabilitating BRI

Beijing seeks to project a better image of its giant infra scheme

At the second — and more understated — Belt and Road Forum in Beijing, China announced it would invest $1 trillion in the Belt and Road Initiative, or BRI. Other estimates of the proposed spending over the next decade are even higher — Morgan Stanley has predicted it will total $1.3 trillion by 2027, and that is on the lower side of these estimates. The hosts of the forum also declared that Chinese companies had invested $90 billion in the various BRI countries. However, it would be a mistake to assume that Beijing’s pockets are bottomless — there are ambitious plans for domestic urban infrastructure as well. The official development agencies certainly do not have that sort of cash on hand. The Silk Road Infrastructure Fund has only $40 billion on hand; the Asian Infrastructure Investment Bank has $100 billion and the New Development Bank, or BRICS Bank, has $50 billion. A significant fraction of the lending of the latter two is also to India, which of course is not part of the BRI. The other method of lending of course will have to be then to specific projects and companies by the Chinese domestic lenders. Gavekal Research estimates this will, if carried out fully, soak up $345 billion from state-controlled financial agencies and $245 billion from state-owned commercial banks. But this still falls short; a significant proportion of the investment will have to be raised therefore by BRI “partner” states from domestic resources. However, the lion’s share of the contracts in the BRI may well go to Beijing’s own firms. Without a clearer sense of the macro-dynamics implied here, it is an error to speak of the BRI as simply Chinese investment in overseas infrastructure. It is far from clear whether in aggregate, and over the entire relevant decade, capital will flow in or out of China.

The question is whether, as some BRI investments fructify, the giant scheme is gathering momentum. Recently, the populist-led government of Italy, which is embroiled in a sustained and embarrassing spat with the European bureaucracy in Brussels and with other European capitals, Paris in particular, made a splashy entry into the BRI. Rome framed this as a quid pro quo — the BRI in return for Chinese investment. But it would be too soon to see this as a success for the BRI. In fact, the EU has managed to drive a pretty hard bargain with Beijing at bilateral talks in April, with the latter promising crucial liberalisation of its internal markets. There is a basic contradiction here: The more shapeless and unfocused the BRI, the easier it is for other countries to “sign up” to it — but the less impactful the initiative will be in specific areas. 

What New Delhi should keep an eye on is not just how the BRI is used to justify investments in India’s neighbourhood that render our neighbours dependent upon the Chinese economy, but also what alternative sources of infrastructure investment can be cobbled together in response to the BRI. It is worth noting that rhetorically the Chinese leadership has been significantly less aggressive regarding the BRI, particularly over the past year. This year’s forum stressed “quality” infrastructure — a product of the armistice signed with BRI opponent Japan in October of 2018. Xi Jinping himself also stressed “zero tolerance” of corruption. Beijing appears to be sensitive to the widespread criticism the BRI has received. It is up to New Delhi to monitor whether this rhetorical shift is reflected in actual changes of how the BRI is implemented.