Question: How would you assess China’s Belt and Road Initiative (BRI) and how do you see it evolving in the coming years? – Part 2

Anzetse Were

China’s BRI has been evolving in Africa for over 20 years and provides a useful focal point to illustrate the value the Chinese government (and increasingly private sector), have been providing to Africa. Given the lethargy and disinterest of the US-EU-UK axis, the entry of the Chinese government was deeply welcomed by Africa governments. China had both excess capital and excess capacity to build out key infrastructure projects and to date, China is Africa’s largest infrastructure financier and about 66% of Chinese investment in Africa has gone to the transportation and energy sectors alone. To be clear, the BRI has not been perfect. Concerns include fiscal opacity and contract secrecy, which raise questions on the over-accommodation of vested interests, hidden debts and contingent liabilities. Further, environmental and social concerns remain, as well as poor project feasibility rooted in inadequate due diligence and poor financial modelling. But while some commentators spin fables of debt traps or that China is pushing Africa into a debt crisis, these are simply not true. The rapid increase in public debt has been driven by the appetite of African governments, and largely financed by private creditors.

The economic dividends of the BRI are clear: Chinese transport projects reduce economic inequality within and between regions in Africa; reduce travel time and energy costs; create jobs; and foster technology and knowledge transfer. China’s financing has had a net positive effect on economic and social outcomes, but the strongest feature has been its intellectual approach and pragmatic style, which constitute 3 elements. The first is communication; China demonstrated an ability in infrastructure development before making its BRI announcement. Thus, African countries already knew China could deliver – B3W could learn from this approach. Secondly, BRI provides multiple points of value: financing, infrastructure builds done within tight timeframes, technical support, job creation, knowledge transfer, etc. Finally, BRI responds to the soft and hard power preferences of African governments by being seen to align with infrastructure priorities and treating African governments with dignity. The US-EU-UK axis seem stuck in a dated intellectual approach that is patronising, bigoted, self-righteous, and frankly impractical. China’s big soft power ability has been its different intellectual approach and style, and though not perfect, has been effective given the traction and reception BRI has received in African capitals.

Anzetse Were is a development economist with over twelve years of experience in economic research, analysis, advising and strategy development focused on Africa. She works with and advises governments, private sector, academia/think tanks and development institutions from around the world. Her areas of expertise include the financial sector and finance systems in Africa, private sector development, the digital economy, climate finance, Africa-China relations, and the political economy of finance and development in Africa.

Darya Miroshnikova

The BRI is an ambitious plan to develop new trade routes connecting China with the rest of the world. To address the massive initiative, China provides an opportunity for participating nations along the route of the historic Silk Road to be interdependent with the Chinese economy through infrastructure development and acceleration of economic integration. BRI has become a tool to address Asia’s infrastructure gap amounting to $26tln by 2030, as estimated by the ADB. Uzbekistan is well placed to be a major beneficiary of the BRI because of the rapid reform progress that complements BRI. Its economic engagement with China is mainly about the infrastructure that addresses the logistical and geographic challenges Uzbekistan faces. Uzbekistan is a double landlocked country bordered by all other Central Asian countries and Afghanistan and has transit connections in all directions. Although the two countries don’t share a border, it’s evident Uzbekistan’s location is a key node in the BRI. An important cooperation area is the China-Kyrgyzstan-Uzbekistan railway project (CKU). This 4,380-kilometer railway will directly connect China and Uzbekistan via Kyrgyzstan. In April 2022, Uzbekistan and Kyrgyzstan expressed a desire to accelerate the long-delayed CKU project since the 1990s. If successfully implemented, there is potential for the route to connect Central Asia and South Asia.

AidData, the U.S. research lab, reported the BRI has caused dozens of developing countries to accumulate $385 billion in “hidden debts” to Beijing. Most of the international development finance has been issued in the form of subsidized loans to support both public and private sector projects. Although Chinese credit contributes to economic activity and promotes trade growth in Uzbekistan, there might be concerns about the risk of dependence on Chinese investments. However, Uzbekistan’s public debt is sufficiently diversified. In 2021, it was recorded at 38% of GDP ($26.3bln). The main creditors are ADB ($5.2bln), the World Bank ($4.3bln), then, the China Development Bank ($2.2bln) and the Exim Bank of China ($2bln). China, along with Russia, is one of Uzbekistan’s top trading partners. In 2021, bilateral trade with China stood at $7.4bln, slightly less than the $7.5bln recorded with Russia, meanwhile, China invested $2.2bln in Uzbekistan while Russia $2.1bln. In this regard, Uzbekistan and China should continue their mutually beneficial partnership to expand commercial and trade routes under the BRI umbrella.

Darya Miroshnikova is a Research Fellow at the Center for Economic Research and Reforms under the Administration of the President of the Republic of Uzbekistan. She has extensive professional experience in statistical and econometric analysis, private equity investments, and international relations and holds degrees from the University of Westminster (BSc in Economics with Finance, MSc in Applied Economics).

Dean Nelson

There was euphoria in Pakistan when the China-Pakistan Economic Corridor (CPEC), the jewel in the crown of China’s Belt and Road Initiative, was launched in 2013, and awe at the scale of its ambition. China pledged $46 billion to kickstart Pakistan’s ever-ailing economy and build new skills, infrastructure and a fast lane highway from Xinjiang to a new Arabian Sea port at Gwadar. Its trucks would be met by 150 container ships to speed their loads to Europe and beyond. It was a revved-up silk road with new sea routes to give China the edge while raising Pakistan from its eternal slumber. It caused alarm in New Delhi which feared the Gwadar Port was another gemstone on Beijing’s ‘String of Pearls’ to strangle India. Away from the fray Western officials considered how they might benefit from this strategic game-changer. Pakistani leaders rubbed their hands with glee and hailed its relationship with China as an ‘all-weather’ friendship “higher than the Himalayas, deeper than the ocean.”

Nine years on, the early romance has cooled, there is disappointment, suspicion and fear. Gwadar is far behind schedule and Chinese officials have voiced dismay at the skills of Pakistani workers and directly criticised Islamabad’s failure to pay Chinese companies. A series of terror attacks on Chinese students, teachers and engineers since last year left 13 Chinese nationals dead. One attack targeted China’s ambassador Nong Rong during a visit to Quetta. The attacks reflect a feeling that CPEC investment has excluded Pakistanis in favour of an increasingly visible, and vulnerable, Chinese minority. China’s ambassador was later appointed to a position in Guanxi province and Beijing effectively downgraded the post since his departure. The Himalayan heights of friendship of CPEC’s 2013 launch are plunging into ravines of resentment – a growing feeling that China behaves as a ‘colonial master’ yoking its new dominion with debt. Pakistan’s foreign currency reserves have dipped below $10 billion, while its external debt is heading towards $100 billion – 20 per cent of which is owed to China. New PM Shehbaz Sharif is caught between begging China for more loans and IMF calls for him to renegotiate existing debt. Pakistan is caught in the same ocean of debt Sri Lanka is currently drowning in.

Dean Nelson is director of Harsil Associates Limited, a business intelligence company with a specialist focus on the Indian subcontinent. He spent ten years in Delhi as South Asia Editor of the Sunday Times and the Daily Telegraph. He is a fellow of the Royal Asiatic Society and author of Jugaad Yatra, Exploring the Indian Art of Problem Solving.

Ovigwe Eguegu

With policy and trade coordination, financial integration, infrastructural development, and exchanges across culture, education, technology, and industry as the goals of the BRI, many African leaders have come to see it as an opportunity to anchor their economies with China, given its strong economic prospects. Since 2013, African leaders have been more receptive to participation in Beijing’s ambitious initiative: today 51 African countries are participants of the BRI, covering over 85% of Africa’s population. This is driven by tangible benefits such as the Mombasa-Nairobi Standard Gauge Railway (SGR) in Kenya which is directly creating 38,000 jobs. However, concerns over debt servicing and secrecy over the contract documents put an air of controversy over the SGR. Zambia is also at the centre of the debt sustainability debate following its Chinese financed massive infrastructure investment. Nonetheless, it needs emphasising that Zambia is an exception given the scale of Chinese infrastructure investment across Africa. In Nigeria for instance, President Buhari has sought out Chinese finance for the AKK pipeline, the Lagos-Kano railway, and the Mambila hydropower project, with considerable degree of success.

Infrastructure development is generally the focus of analysis when observing China-Africa relations vis-à-vis the BRI, but there is FDI targeted at industries such as financial services and technology. With these as context, speculation and media analysis suggest that African countries are positioned to maximize the value of BRI participation if there is an adoption of a more coordinated approach towards China. With the AfCFTA being linked up with the BRI, China has the incentive to enjoy deeper trade benefits while African counterparts operating within the BRI and AfCFTA can enhance intra-African trade. African countries on the other hand are well positioned to key into the massive potential of the BRI with preferential trade frameworks and economic negotiations designed to protect nascent African internal markets and industries from cheap Chinese imports. In all, the importance of infrastructure to economic growth is driving Africa towards the BRI, but to the disappointment of some governments, the BRI is not the one-stop shop to meet all their infrastructure needs. Furthermore, the coming future will also show whether trade liberalisation between BRI participants will undermine the main purpose of the AfCFTA, which is to bolster African trade and encourage scaling economies.

Ovigwe Eguegu is a Policy Analyst at Development Reimagined. He specialises in geopolitics, with particular reference to Africa in a changing global order. Ovigwe’s work includes policy-oriented research, consulting and publication on geopolitics, geo-economics and security.

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