The second Belt and Road Initiative (BRI) Forum was attended by 5,000 delegates from 150 countries including 40 heads of government and representatives of 90 international organisations where more than 280 agreements were signed totalling $64 billion. The forum has only not only refuted all propaganda against BRI but also proved to be better than IMF, World Bank type Western organizations where debtors have dictated all terms from above.
This is because China understood the old model of neoliberal globalization led by the USA is in deep crisis and cannot be sustained. Hence China started pioneering a new approach to globalization under the concept of BRI. While the USA led neoliberal globalization was about creating demand through asset trading, China led Belt Road globalization is about creating demand by infrastructure investment. There are two major elements: a land-based infrastructure network throughout Asia and extending to Europe-Africa and a maritime series of routes linking ports of China to those of Europe, Africa and Latin America. In 2017 Xi further introduced several principles within the BRI: peace, cooperation, openness, inclusiveness, understanding and mutual benefit. In the second BRI forum Xi clearly added transparency, mutual agreement and intellectual property laws to the principles expounded before.
More of Europe with BRI
Just before the forum, China’s President Xi Jinping signed a Memorandum of Understanding with Italy. Italy became the first G-7 country to join BRI. Switzerland and Luxembourg have shown similar intention. Portugal and 16 Central and Eastern European countries had already joined BRI. France though still sceptic about BRI signed multi-billion dollar deal with China which profited French company Airbus a lot. So though most of Western Europe is still not riding the BRI ship but is failing to prevent others from boarding it. Surely, Xi scored big before the beginning of the second BRI forum.
Russia with BRI
Another keynote speaker at the forum was Russia’s President Putin. He stressed the need to develop modern transport, energy infrastructure and unified telecommunications system. BRI is closely aligned with Russia’s aim to establish what Putin called a “Greater Eurasian Partnership”. Putin clearly sides China on its ongoing trade war with the USA and talked in favour of globalization. The USA had given threats to Venezuela following a coup attempt, imposed additional sanctions on Iran and imposed hundreds of billions of dollars of additional tariffs on Chinese imports. Putin termed all of these actions as contrary to international law, the UN Charter and existing multilateral trade agreements. This forum gave a clear message that among three superpowers of the world, Russia and China are sailing together while the USA is left alone.
BRI is not Debt Trap
A major criticism of Western nations against the BRI is that it creates a debt trap for the relatively poor and underdeveloped nations that are participating. Rhodium Group published an analysis of what they called the debt trap question. The analysis was done on 40 cases across 24 countries where China was engaged in external debt renegotiations. The key findings included finding that asset seizures are a rare occurrence just 3 out of 40 cases. In the majority of the cases, the result of the renegotiation was an outcome favourable to the borrower. In 18 out of 40 cases, the debt was written off; in 11 cases the debt was deferred; in 4 cases refinanced, and in another 4 cases the terms were renegotiated. Among the three cases of asset seizure, two cases have seen wonderful results. For example, the Hambantota port of Sri Lanka and Gwadar port of Pakistan had made a profit in 2018 after several years of losses.
So these two cases prove that Chinese takeover has produced excellent results for the projects and host companies themselves. Just opposite happened in Indian investment of Chabahar port of Iran. The port is still not profitable and India is refusing to invest more in the loss-making project. But Iran calculated that if more investment can be made for few more years, Chabahar may see profit like Gawdar and Hambantota too. This proves how China is exceptionally adept in long gestation infrastructure investment due to its state enterprise led socialist economy which can endure more losses than capitalist economies.
Mutual Agreement as Pillar of BRI
An example of mutual agreement is seen in the case of Malaysia. Prior to the last election in mid-2018, and then-candidate Mahathir Mohammad criticized the Malaysian East Coast Rail Link project as unfair. After Mahathir won the election the project was put on hold. China agreed to renegotiate terms. A new agreement was reached in April 2019 after eight months of negotiation and construction resumed immediately. Mahathir attended the BRI forum and pledged his support for the Initiative. The path of the rail line has to be changed by moving around the mountain on the demand of the Malaysian government. Previously it was thought that by creating a tunnel within the mountain a short distance rail line would be laid.
This would make a typically Chinese style expensive in the short run but beneficial in the long run project. But China has to transform the project on lines of host Malaysia. This saved a lot of money for Malaysia. Any project under BRI is done by taking into the confidence of both parties is clearly depicted in this example. BRI is not at all China-centric but done on the mutual agreement is clear in this Malaysia case. Xi himself said in the forum that from now onwards BRI will take into account the macro conditions of the host country before investment. This shows that Malaysia case will be replicated throughout the BRI projects across different part of the globe.
BRI Catering to Local Economy
Another complaint is that Chinese investments in BRI are often tied to the conditions like workers and materials used in projects have to come from China. Thus the local economy of the host country is not much developed. Thus Xi stressed that China would put its priority on creating jobs in the local market and promoting sustainable financing. Though no new example is set yet it proves in future China will take these into account as well.
Intellectual Property Laws with Chinese Characteristics
Xi also traced the point of intellectual property rights. The USA under Trump is continuously accusing China about Chinese theft of US intellectual property. Xi and China repeatedly told that they will make Chinese law more robust so that profit goes to the owner of intellectual property and in return, China must get be allowed to invest in high tech industries and move to the higher value chain. Xi used second BRI forum for extending the intellectual property rights into the modus operandi of BRI globalization. This shows China is not only forming intellectual property laws to cater to the demand of US investors but also to the basic structure of the global investment.
The sharing of intellectual property includes setting up science parks and major personnel exchanges with the other members of the BRI. The non-members of the BRI, notably the United States, will not share this benefit. While Western media thought that Xi was informing the USA on intellectual property laws in the Second Belt Road Forum, in reality, Xi was informing the entire globe that China is forming intellectual property laws not just to suit the purpose of US investors but also to make it a pillar of new Belt Road Globalization. Intellectual property law with Chinese characteristics is something that will be revealed to the globe very soon. The breakdown of trade talks between China and the USA has a lot to do with this new Chinese approach to intellectual property laws.
The second BRI forum is a massive success for China. This forum not only kept Russia and old supporters within BRI but also added more of Europe into it. This forum also tried to address the criticism against BRI. It proved debt trap theory wrong, created an example of mutual agreement in the Malaysian East Coast Rail Link project, taking into account the demand from the local economy and above all stated about pioneering intellectual property laws.
DISCLAIMER: The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy and position of Regional Rapport.