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The famous new “silk roads” were launched by Xi Jinping at the beginning of his first term as head of the Chinese Communist Party. It was one of the main objectives of his foreign and commercial policy. As he prepares to enter a third term, what is the status of this China-initiated alternative to US globalization?
By Dominique Baillard
In the official discourse of Chinese leaders, references to this enormous weapon of economic diplomacy are increasingly scarce. However, the projects are real. Some 150 countries participate. Some 3.5 trillion dollars have been injected since 2017, three times more than the gigantic US infrastructure plan proposed by Joe Biden. Given the scale of the network, it is unlikely that Beijing will suddenly withdraw. China now needs to recoup its investment. First of all, you need to be repaid for the money you lent. But times have changed, the promise of a win-win partnership has faded with the rise of new economic risks and strong criticism from the affected countries.
The beneficiary countries are on the verge of bankruptcy due to the over-indebtedness caused by the “silk routes”
The most dramatic breach is in Sri Lanka. The population, deprived of everything, has rebelled against the government. Pakistan also has precarious finances, beset, among other things, by the debt linked to the “silk routes”. Many other countries have been weakened by these pharaonic projects initiated by Beijing. A quarter of the member states of the “Silk Roads” are under financial stress. Initially, by playing the role of creditor to the emerging world, China found a providential outlet to convert its trade surplus with the United States and thus limit the rise of its yuan. But the appearance of Covid and the economic difficulties that accompany it have slowed down the projects. Repayment difficulties are multiplying, which is a big problem for indebted countries, but also for China, which is trying to recover its money.
The second recurring criticism is that these infrastructures, which are supposed to accelerate development, do not always deliver on their promises.
Sometimes the work is unfinished. This is the case of the railway line that should connect Mombassa, in Kenya, with Uganda. Beijing refuses to finance the last stretch of 300 kilometers. Furthermore, this new mode of transport is expensive and therefore not used for freight transport. Sometimes these infrastructures do not correspond to any real need or have failed to create it. This is the case of the international airport built in Sri Lanka or the port of Hambantota, which cargo ships ignore. The repayment of loans for structures that do not pay off is an unsustainable burden, which is why many countries are renegotiating or rescinding agreements. It is something that has been seen in Indonesia, Malaysia, Nepal and Bangladesh.
Do these setbacks cast doubt on the durability of the “Silk Roads”?
Xi Jinping weaved his web for domestic economic reasons. His goal was to facilitate trade by finding new outlets and opening up the eastern provinces. In this sense, the future seems very uncertain. World trade slows down and regionalizes; China itself is primarily trying to satisfy its domestic demand and, above all, is now facing a sharp slowdown in growth, due to the zero Covid policy and the Russian war in Ukraine. All this calls into question this silky fabric in part.
This project also has a strategic purpose. Even more important for Beijing. It is an alternative route to the China Sea for exports. And this goal remains a top priority at a time when the confrontation with Taiwan is becoming tense. Therefore, the “Silk Roads” still have a bright future, even if they have to be reformulated in part.
