IFRI (Institut Français des Relations Internationales)
The Ifri report analyses the approach developed by China since the launch of the Belt and Road in 2013. The report mainly explains that China increasingly sees its project as a vector for promoting a new form of globalization.
The following developments can be noted:
- Geographical expansion: The Chinese project far exceeds the scope of Eurasia. It encompasses Africa, Latin-America, the South Pacific and Arctic. Actually, all countries are potentially part of the B&R.
- Sectoral expansion: The Chinese B&R goes well beyond physical infrastructure projects and now encompasses the institutional, normative and digital sector.
- Internationalization of Chinas national strategy: China is promoting objectives that can be referred to in wide parts to Chinese planning documents. B&R appears more like a “strategic plan” than an initiative. The objective of the B&R is to limit China’s dependence on some foreign infrastructure standards and enable China to better manage a wide range of international flows and better restructure global governance.
According to the French Research Center Ifri, 3 scenarios are possible concerning the development of B&R:
- Continuous development of B&R creating a new form of globalization;
- Continuous development of B&R clashing with other forms of globalization, return of international bipolarization;
- Slowdown and decline of B&R.
Scenario 2 is the most likely to happen according to Ifri
Scenario 2 best reflects the likelihood of partial progress of the Chinese project, which would be neither a complete success nor a resounding failure in all areas, but would lead to a certain polarization between, on one side, China and the countries supporting B&R and, on the other side, a coalition of skeptical countries providing other infrastructure financing projects and actively promoting the maintenance of liberal standards internationally.
Dimensions of the B&R project
Infrastructure development is at the heart of the Chinese project. The Leitmotiv behind is “interconnectivity”, meaning the construction of cross-border infrastructure projects. This development is consistent with China’s domestic economic objective to establish: i) cross-border communication networks that could in the long-run facilitate trade within the region ii) its own network of ports iii) investment in energy infrastructure, such as expanding oil and gas pipelines networks iv) telecommunication infrastructure v) industrial parks vi) economic cooperation zones abroad.
Development of norms and standards
But much more sectors than just infrastructure are impacted by the Chinese B&R project.
China is motivated by broader geographical objectives. China now wishes to position itself as a reference for the world by trying to internationalize some of its key official concepts and statements, aiming to become a normative power. China has for example established a strategy to create new technical standards in very diverse sectors, hoping that they will progressively be established as reference standards for the world. The creation of these new standards is considered in the broader context of the emergence of a new form of globalization shaped by China based on new trade routes and developed through huge investment in flow management infrastructure.
In addition to normative power, China is also developing structural power, meaning to increase China’s capacity to set the rules of international economics and politics. Investing in the restructuring of global governance, both by integrating into existing institutions and creating new ones (e.g. economic, climate, cyber security). Since 2015 China has included the development of technical standards as a sphere of action for its B&R projects. For the purposes of promoting Chinese standards abroad, the Standardization Administration of China regularly prepares development plans as part of B&R. China will also seek to deepen bilateral relations in the area of standards with almost all the countries and regions involved in B&R.
Financing of B&R projects
The financing of projects so far has been in the forms of loans granted on relatively non-concessional terms. In addition to loans some projects are subject to equity financing. The Asian Infrastructure Investment Bank (AIIB) remains marginal actor in financing. According to the Chinese Development Bank, at the end of 2017 the bank had provided US$110 billion in loans for projects marked for B&R and it intended to invest an additional US$150 billion over the next 5 years.
Beyond the risk incurred by China in the event of an overhang of the countries involved in B&R, another difficulty could impede the continuation of the project: China’s financing capacity is not boundless. The pursuit of unilateral financing by China via bank loans seems even less realistic today in the context of significant economic downturn in China. The pursuit of unilateral financing is not sustainable and reaches its limits. An alternative could be bond issuance and co-financing with foreign partners. New possibilities may open up for foreign partners, provided that an agreement is possible on the conditions to be complied with for implementing joint financing. This possibility is likely to remain theoretical. It would correspond to a fundamental reassessment of the original rationale and nature of B&R, and it is not guaranteed that China is willing to accept it.