Written by Nirupama Krishnakumaran

If you take a look at the press surrounding China’s economic decisions right now you’ll notice a trend of negativity. With it being the market dominators in the Electric Vehicle market, the world is becoming more and more cautious of Chinese exports – America has imposed 100% tariffs on the vehicles and trade blocs like the EU etc. are following suit with increasing tariffs. China itself has its domestic debt struggles and is facing stagnant property sectors and low confidence in its own economy. Chinese youth are turning to lottery tickets to find a chance at financial revival, and low animal spirits are a serious cause for concern.

But what of the positive economic initiatives that China has started? How positive of an impact have these initiatives actually had on the relevant economies?

Enter China’s Belt and Road Initiative (BRI).

Announced in 2013, 一带一路 connects more than 150 countries and 30 international organisations, making it the largest multilateral development programme undertaken by a single country to date. The initiative stems from Chinese roots in the ancient Silk Road and the influence they gained from this time period, hence the nickname ‘New Silk Road’. It aims to boost trade and connectivity worldwide through infrastructure, development, and investment; Beijing’s five aims for the project are “policy coordination, facilities connectivity, unimpeded trade, financial integration, and people-to-people bond”.

In its last eleven years of existence, China has pumped trillions of dollars worth of investment into this project and its two parts: the Silk Road Economic Belt (focusing on building and expanding land trade routes) and the 21st Century Maritime Silk Road (focusing on expanding sea trade routes). The project has mostly concentrated on upgrading current infrastructure and putting in place new ones such as ports, railways, and roads, which are all integral to easing trade. China has also invested in bringing internet connectivity and digital advancement to the recipient countries who could benefit greatly from it, such as Mozambique where they invested in satellite TVs for 1000 villages.

There are many benefits from this initiative, starting with increased global connectivity and integrating more developing economies into the global economy. This increased global connectivity through the programmes many economic corridors can majorly lower trade costs (such as by high speed railways cutting down travel time) which in turn allow for the expansion of trade, increase foreign direct investment in recipient countries and could hence lead to the reduction of poverty by increasing living standards.

Many of the participant countries face the issue of infrastructure and policy gaps, which massively hinder trade and subsequently foreign investment. This scheme addresses these issues, improving and reaching the actual economic potential of these countries. Considering many participants are responsible for a large proportion of worldwide exports but are, as of now, below potential due to gaps in infrastructure, the scheme provides these economies with strong foundations for improved trade which will benefit their economies in the long run by contributing to aggregate demand. It is important to note that many of these countries have been able to start essential infrastructure projects mainly due to the funding provided by the initiative, therefore strengthening global ties in the south of the globe.

However there is still a long way to go with several issues to address. Critics of the initiative worry about debt sustainability and name the programme as a ‘debt trap’. Through the BRI, China has become the world’s largest debt collector and for many recipient countries, the costs of building essential infrastructure outweigh the benefits. With several projects there are issues of corruption and cost overruns as well as negative environmental impacts coupled with shortfalls in funding. There is limited transparency from Beijing, which could bring about corruption and exploitation, masking the true risk of the initiative. Some Chinese private companies involved in the programme do not follow through which unfortunately deprives countries of crucial foreign currency needed to strengthen their own economies and allow them to purchase foreign goods.

The next steps for China are clear. They have already started focusing on sustainability and environment protection, which it has proven it is capable of time and time again by becoming the world’s largest manufacturer of solar panels and wind turbines amongst many other green initiatives. China has noted that they want to expand the BRI to take into account and address public health, which is vital, especially now since the pandemic. This will strengthen the labour force and could in turn allow for lower unemployment. They also wish to contribute to the digital economy, of which they are doing well in outside of the BRI, but it will be fascinating to see this come hand-in-hand with globalisation. It may even take a stand on social issues and providing aid to its recipient countries, many of which struggle with issues such as large wealth disparities and heightened violence, capping their ability to grow by not providing their citizens with hospitable living conditions.

It will be intriguing to see the future of 一带一路, considering its successes and points of improvement. China is currently leading in terms of initiatives in globalisation, which is interesting considering much of the West’s stance on China’s input on the global economy today is quite negative. How the BRI will change these perspectives in the future will be shaped by how Beijing chooses to integrate the West into this initiative.