Why does fury spark so much belt and road initiative in China?

There were certainly questions asked when Victoria first signed a memorandum of understanding to join the China Belt and Road Initiative (BRI) in 2018, but it was not until last week that critics reached a overexcitement.

The depth of the animosity over the deal shows how badly the BIS has become a fault line in Chinese-American competition.

And Australia, economically interdependent on China but a committed ally of the United States, finds itself caught in the middle.

What is the BIS and what does China want?

There is a wide range of projects encompassed under the BIS umbrella, focused on six main economic corridors.

These corridors connect China to Central Asia, the Middle East and Europe by land (the economic belt of the Silk Road), and to Southeast Asia, the Indian subcontinent , the Pacific and East Africa by sea (the maritime silk route).

To date, China has promised an investment estimated at US $ 1 trillion in tangible and intangible infrastructure (from ports and high-speed trains to telecommunications and cyberspace) and memoranda of understanding signed with 138 countries.

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However, there is a lot of debate about what really motivates the project.

Some consider it geopolitics gambit to break what Beijing sees as an American encirclement after the Obama administrations pivot to Asia.

Others say President Xi Jinping and the Chinese Communist Parties want to shake up the Chinese economy from its recent slowdown and resolve some of its structural diseases.

From an economic point of view, the initiative serves several purposes. It enables China to correct economic imbalances between its coastal and inland provinces, find outlets for excess production capacity and internationalize chinese currency.

Finally, some have rejected the Belt and Road initiative as a soft power vanity project polish International image of China.

Indeed, Chinese leaders view the BIS as way both to legitimize the Chinese model of government and economic development for the rest of the world, and to position China as the leader of a new world order alternative to that created by the United States after 1945.

In reality, the BIS is about all of these things.

What are the advantages and pitfalls of the BIS?

Thinking about the global and regional reception of BRIs, we must recognize that there is a demand for what Beijing offers.

Its $ 1 trillion pledge represents a decrease in $ 26 trillion that Asian economies need to invest in infrastructure, but they surpass anything offered by other major regional players.

the blue dot network announced by the United States, Australia and Japan in November response to the BIS, for example, has been touted as encouraging investment in infrastructure that is open and inclusive, transparent and economically viable.

But the initiative is not in itself an infrastructure financing mechanism. Rather, it is about certifying projects that demonstrate and respect the principles of global infrastructure.

While this may be an admirable goal, there is a problem, as the former executive director of the Asian Development Bank Peter McCawley points out:

A road is a road, whether built with American or Chinese money. At present, it seems that the Chinese are ready to finance the construction of infrastructure in Asia, unlike the United States.

Concerns about the nature of Chinese investment in the BIS are valid. Many BRI projects are funded by Chinese public financial institutions such as the China Import-Export Bank low borrowing costs and interest rates.

This allows them to lend on favorable terms to Chinese companies, which can then undermine foreign companies for infrastructure offers.

Another concern is that Beijing is committed to debt trap diplomacy by giving excessive credit to countries that will find it difficult to repay it.

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The objective is then to extract from these countries political and economic concessions or physical assets, such as ports or land transactions.

Several studies suggested that the story of the debt trap was exaggerated. But while a Lowy Institute report last year Noted China has not deliberately engaged in debt trap diplomacy, she added

the sheer scale of Chinese lending and its lack of strong institutional mechanisms to protect the debt sustainability of borrowing countries poses obvious risks.

Victorias BIS agreement: storm in a cup of tea?

Beyond the economic aspect, the Belt and Road Initiative poses clear political risks for Australia.

Australians are trying to balance their alliance with the United States, and economic interdependence with China has become even more difficult, as the two have become rude and mean in pursuing their interests under Donald Trump and Xi Jinping.

Some analysts claim Victorias BRI agreement means Chinese companies

build pieces of national infrastructure, possibly with links to Chinese state banks and other entities.

But the reality is perhaps more prosaic. the memorandum of understanding And subsequent framework agreement talk about mutual commitments to promote practical cooperation of Chinese companies in Victorian infrastructure and Victorian companies in China and in third markets.

They are also not legally binding and can be terminated by mutual agreement.

Meanwhile, Prime Minister Daniel Andrews said this week, Victoria would not accept telecommunications projects under the BIS, a key security concern.

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BRI and the competition of the great powers

The fury over the Victorias agreement is due to the fact that there is no Australian consensus on the BIS or on the broader issue of our relations with Beijing. A debate on these issues is necessary if Australia is to chart the course between two major powers preparing for confrontation.

Unfortunately, the debate on china became toxic.

Those who recognize the risks of engaging with China, but still argue for closer ties, are often loose or worse. Those who sound the alarm about Beijing’s malicious intentions are accused to cause panic in China.

To say that it is useless is an understatement.

Some talk of a new cold war between the United States and China.

Yet, as Cold War historian Odd Arne Westad has noted, Chinese-American competition is not a replay the past. The conflict between the two largest powers will not lead to bipolarity, but

will facilitate catching up with others, as there are no ideological constraints and the economic advantage counts for much more.

Always attaching ourselves more tightly to one or the other of the protagonists is unwise, as Westad says,

The more the United States and China fight, the more leeway the other powers have.