By Ted North
U.S. Secretary of State Mike Pompeo’s recent comment, warning Italy to be wary of “how China uses its economic power to cultivate political influence and erode sovereignty,” is just the latest development in the United States’ and China’s fierce competition for global influence.
In recent years, an uptick in China’s international outreach through programs such as the Belt and Road Initiative (“BRI”) has led to what some are calling the “great game” of the twenty-first century—a reference to the nineteenth century contest between Russia and Britain to assert spheres of influence in Central Asia. Today, the game is much different. In order to hedge the advance of Chinese influence through predatory practices masked as economic initiatives, the United States must evolve its foreign policy to present viable alternatives to countries that are otherwise inclined to take part in the BRI.
The BRI was announced in 2013 by Chinese President Xi Jinping as an initiative to update the ancient Silk Road with massive infrastructure projects for land and sea corridors connecting China to the rest of the world. According to the Chinese government, 136 countries and 30 international organizations have already signed cooperation documents as part of the BRI, which account for more than 65% of the world’s population and 40% of global GDP.
Through the BRI, China states that it is hoping to rejuvenate its economy and strengthen the economies of its neighbors by opening new markets for its goods and excess industrial capital. BRI projects, such as the construction of the Vietnamese-Boten Railway across Laos, costing approximately $5.95 billion, aims to place Laos at the center of a trade route spanning from the Chinese city of Kunming to Singapore. By May 2019, China had spent approximately $200 billion on BRI projects and some estimates state that spending could reach as high as $1.2-1.3 trillion by 2027.
However, behind the China’s state-issued rhetoric exist practices that many experts deem predatory and have come to be known as China’s debt diplomacy. Unlike foreign-aid projects from other countries that utilize aid-grants, BRI projects are built with low-interest loans. These notoriously opaque BRI loan terms have left many countries with unsustainable debt. For example, the high-speed rail project in Laos will not only grant China a 70% ownership stake in the railway, but it will also cost more than half of Laos’ total GDP and raise Laos’ public debt to nearly 70% of its GDP—a level the IMF classifies as a high risk of debt distress. Unfortunately, Laos is only one of eight BRI-recipient countries that international institutions have identified as being at a high risk of debt distress because of BRI loans.
In Sri Lanka, the state government struck a $1.3 billion deal with China to build out the strategic Hambantota port as part of its BRI. In 2017, with Sri Lanka drowning under its increasing debt to China, Sri Lankan President Maithripala Sirisena sought to renegotiate the government’s repayment schedule. China requested instead to be given control of the Hambantota port in the form of a long-term 99-year lease in return for partial loan forgiveness. Sri Lanka conceded and ended up handing Hambantota port over to China, which many decry as an erosion of Sri Lanka’s sovereignty, fostering additional fear that China has plans to use it as a naval base in the Indian Ocean.
Similar stories of emerging economies burdened by BRI loans continue to surface, and there are many experts who fear China is using the loans as a means of economic and military expansion. Meanwhile, the United States has failed to keep pace with China’s growing influence. Asian countries considering the BRI have been driven toward China and away from the United States, fueled by worries of Trump’s “America First” policy and the United States’ withdrawal from the Trans-Pacific Partnership. The subsequent Indo-Pacific investment package of $113 million announced by Secretary Pompeo was largely greeted with widespread indifference.
Furthermore, the United States’ refusal to sign onto the BRI has done little to slow the growth of cooperating countries. Many experts see the United States’ repeated shrugging-off of the BRI as a strategic mistake. Even European allies—such as France, Germany, and the United Kingdom—have joined the main BRI loan bank, the multi-lateral Asian Infrastructure Investment Bank, in order to compete for more BRI business. Most recently, Italy formally signed on to the BRI, much to the dismay of the United States.
The lack of a clear and substantial American strategy to provide viable alternatives to the BRI is providing China the space it needs to advance its geopolitical goals through predatory practices. Stories, like those of Laos and Sri Lanka, will persist as emerging economies continue to accept unclear BRI loans that take advantage of the benefits China’s international initiatives promise. The United States is in a unique position as an international economic power to curb China’s advances, but an evolution of United States foreign policy is necessary.
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