The One Belt-One Road summit held last weekend in Beijing is fundamentally the elaboration of a Chinese dream wherein participant countries appear only as facilitators and fade away when compared with the gains China would make out of it.
A look at the extent of money China is planning to pour in justifies the contention that OBOR, notwithstanding the way it is generally perceived as mutually beneficial, would put China on top of the hierarchy of the states participating in it. This is, in simple words, a move towards the construction of what is being termed as a “de-Americanized” global order.
Xi told his audience that he had proposed an additional RMB780 billion (approximately US$113 billion) to be disbursed through multiple sources. These include the Silk Road Fund; the China Development Bank; the Export and Import Bank of China and also overseas capital provided by Chinese banks. The Asian Infrastructure Investment Bank (AIIB) is not part – at least not yet – of this proposed package.
Out of this amount, RMB250 billion will be provided in loans from China Development Bank, and RMB130 billion from Export-Import Bank of China.
This funding is not direct investment but loans, as in the case of China-Pakistan-Economic Corridor, which the Chinese sources will provide to the participant countries. That would put Beijing in a position to steer the course of each country’s development to a direction it deems fit for its own interests. China, as the primary financer of loans, therefore stands to gain the most and it stands atop the list of potential beneficiaries.
What adds even more substance is the whopping trade imbalance that China has vis-à-vis almost all the OBOR countries and the way the OBOR initiative is solidifying, through various agreements, this difference. For instance, for Laos, one of Asia's poorest countries, the US$7 billion cost for the China-Laos railway was more than half its 2015 gross domestic product, 70 percent of which is going to come from China, allowing it to dominate the country’s first overseas connecting route. This, as Asia Sentinel pointed out earlier in March, is regardless of whether the project would itself benefit Laos, a country least needing a railway project of such high magnitude.
Similarly, while Xi called CPEC the flagship project of OBOR, the very loan-riddled story of the CPEC itself speaks volumes about the extent to which China will get as repayments, a fact that potentially explodes the myth of “win-win co-operation” for all.
According to an independent report ‘Pakistan’s External Account Concerns and CPEC Repayment’, Pakistan will be paying US$90 billion back to China over 30 years against loans and investments worth US$56 billion under CPEC, with the average annual repayment standing at US$3.7 billion.
Thus the OBOR project, designed to span 65 countries covering 65 percent of the world population, would enable China to not only champion as the primary engine of one third of global economic output, but also accumulate vast amounts of capital as repayments, and through its own direct trade from Central Asia to Europe.
It is a plan that is going to allow a Chinese penetration in the “host” countries on an unprecedented scale. Again, at least this is what the CPEC master plan tells us in terms of the presence that China will come to establish through its “flagship” project in Pakistan, putting it yet again on top of the vertical order China is building.
Besides it, the OBOR remains fraught with some serious deficiencies too. For instance, the pledges China has so far made have been far from sufficient to complete the projects its leadership claims to have already put in motion, or meet Asia’s growing infrastructural requirements, which will be needing, according to ADB, a whopping US$26 trillion up to 2030.
For instance, the Silk Road Fund, set up at the end of 2014, relies on just US$40 billion. In reality, however, it has been able to invest US$6 billion in 15 projects so far. This is apart from the US$2 billion it has invested in Kazakhstan.
Similarly the AIIB, while not yet into the OBOR, went online in January 2016 with capital of US$100 billion, but disbursed less than US$2 billion last year.
Not only is the non-availability of ‘investment’ delaying projects, but a major part of the problem for China remains locating low-cost projects. A pertinent case pointing to this very conundrum is the Jakarta-Bandung railway project.
While bidding for a rail link that would connect the Indonesian capital to the capital of West Java in 45 minutes was won by China in 2015 against fierce competition from Japan, it has ever since faced delays as estimated costs have swelled from US$5.1 billion to $6 billion. And while the agreement to fund the project has now been signed whereby China Development Fund would lend $4.5 billion, covering 75 percent of the project's estimated cost, the project is yet another grim reminder of what the OBOR is.
While Xi could not call a spade a spade, the OBOR is far from a gateway to “win-win co-operation,” it is a project saddled with loans, allowing China to invest and re-invest its surplus capital, money that it will use to further boost its international standing to potentially alter the global order to its own advantage in the coming decades, if not years.
It is way to channel China’s capital to the rest of the world. Needless to say, Forty-seven of China's 102 central-government-owned conglomerates participated in 1,676 Belt and Road projects, according to government statistics.
China Communications Construction Group alone has notched up $40 billion of contracts and built 10,320 kilometers of roads, 95 deep-water ports, 10 airports, 152 bridges and 2,080 railways in Belt and Road countries.
What OBOR is therefore doing is not simply a Chinese push towards development, it is equally raising a multitude of problems for the host countries. A clear absence of enough resources to repay loans perhaps tops the list.
China's central bank governor Zhou Xiaochuan was perhaps ironically right when he warned that reliance on loans raises "risks and problems," starting with geo-economic hazards and unsustainable growth. Hence the question: where will OBOR lead these countries to: towards a sustainable or a debt-trapped course of development?