Understanding China’s Belt and Road Initiative

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The Vivekananda International Foundation (VIF) organised a seminar on 8 April, 2019, on ‘Understanding China’s Belt and Road Initiative’. The deliberations were divided in three broad themes: Aims and Drivers of the Belt and Road Initiative (BRI); Belt and Road Initiative and Regional Perspective; and India’s approach to Belt and Road Initiative. Dr. Arvind Gupta, Director, VIF delivered the opening remarks. Amb. Ashok Kantha, Mr. Jayadeva Ranade, Prof. Sujit Dutta, Dr. Pankaj Jha, Mr. Sushant Sareen, Dr. Sreeradha Datta, Amb. D.P Srivastava, Amb. Anil Wadhwa, Dr. Ruchita Beri, Amb. Arun K. Singh, Lt Gen S L Narasimhan and Dr. Arvind Virmani participated in the discussion. In-depth discussions were held on the BRI and the Regional Perspectives covering Southeast Asia, China Pakistan Economic Corridor (CPEC), South Asia, Central Asia, Europe and Africa.

Progress of the BRI

Since the launch of the BRI in 2013, there has been a lot of development in the project. The second Belt and Road Forum on Internal Cooperation held this year was attended by 37 Heads of States as against 29 at the first summit. Vladimir Putin has been confirmed as the most important foreign guest for the summit. The Forum was an opportunity to take stock of the BRI five years after it was enunciated by Xi Jinping and lay out a new roadmap for the coming years. However, the Chinese government has maintained studied ambivalence on this. Hence the scale of BRI remains ambiguous.

The aims and drivers of the BRI are still evolving. These fall into two categories. First is the the pragmatic consideration that is linked to connectivity, quest for new engine of growth, utilisation of surplus capacity, development of new markets as Chinese industry moves up the value chain, more deployment of its foreign reserves, internationalization of Renminbi, and developing and stabilising the western region of China. Second is that beyond a point the BRI may not be able to be a panacea for China. The exports of China peaked in 2006 to 36 per cent of GDP and thereafter declined to 19.75 per cent in 2017. Notably, China cannot employ its capacity/overcapacity beyond a point. The bulk of China’s growth is now taking place through domestic investment and consumption. The excess capacity is also being addressed because domestic pressures, supply-side structural reform and cutting down of capacity in coal, steel aluminum. Foreign exchange reserves of China continue to be with the US and these are not declining. Hence although the BRI has a pragmatic consideration its strategic dimensions are increasingly more important.

Indian Position

Indian stance on the initiative has been shaped by the violation from CPEC. The CPEC is a Chinese geopolitical move and should not have played any role in facilitating BRI. India has also described the project as not being opaque and whose terms have the tendency to lead to debt burden for the borrowing countries. In fact, some of the countries, after the first summit, used India’s formulation to justify their stand. Taking everything into consideration, India needs to come up with a new geopolitical and geostrategic framework for the region that is in her interest.

The five tenets that Xi Jinping mentioned on 7 September 2013 at the Nazarbayev University, Kazakhstan, have fructified partially. Some of the proposals have been implemented partially that too on bilateral basis. There has been no grand connectivity project that has been happening. Additionally, trade facilitation has been one way, monetary circulation has not taken place but more and more currency swap has taken place, and there is growing role of China in the partner countries. The major issue with the BRI is that it is unilateral, lacks transparency, and violates India’s territorial integrity, is of doubtful financial viability of projects and there are issues of cost vs benefit. Unlike 2017, India is not the only country resisting it, there are already 32 countries that are facing the debt trap issue.

The BRI should be viewed as part of China’s quest to be a world leader. In fact, mature countries of Europe are now joining BRI for their benefit. The BRI is facing the debt trap issue in some countries but on the contrary it has been successful in others. A careful assessment of the BRI needs to be made.