The Belt and Road Part 2: The International Stage

October 3, 2020
Editor(s): Charlie Francis
Writer(s): Anuk Kariyawasam, Julia Hu, Ben Griffiths

While Australia has remained cautious of China’s Belt and Road Initiative (BRI), a growing number of countries around the world are coming to accept this new Silk Road. With 138 signatories on its memorandum of understanding (“Internal cooperation profiles”, 2020), China has marketed the BRI as a way of increasing trade, foreign investments, and global welfare (Churchill, Constantinescu, & Dappe, 2019). However, BRI has faced significant international pushback from India, the USA, and countries in the EU due to its controversial economic and political implications. Indeed, many of the Western powers have slammed the Initiative for the threats it imposes on the security of participant countries by saddling them with unsustainable debt, and as a ploy to assert China’s influence over the developing world (Zhou, 2019). Growing global tensions have also led many in the international community to question China’s own motives behind the future of the project, and the long-term sustainability of what is arguably one of the most “ambitious foreign policy and economic plans in modern history” (Zhou, 2019).

The ascension of Xi Jinping to the presidency in 2013 marked the end of China’s long held dictum, “hide your strength, bide your time” (Heydarian, 2014) and heralded in a new age of aggressive absolutism. Xi has sought to establish Sino influence in the world stage and bring the Middle Kingdom out of passivity on both economic and militaristic fronts. BRI serves as a flagship of this new assertive stance, acting as an important link between the national revitalisation needed for China to consolidate its international influence.

Source: South China Morning Post

BRI serves as an important mechanism in spurring China’s domestic economic growth, helping to solidify the foundations needed for its superpower status. This can be seen through its strategic investment in developing countries, such as Iraq and Pakistan, where such economic corridors will help China to diversify its energy trade routes (“Advance China’s interests”, 2020). This removes its sole reliance on the Strait of Malacca trade route out to the Indian Ocean, helping it to secure economic stability, development, and national security (Potter, 2012). Likewise, transnational infrastructure projects will generate growth in China’s underdeveloped landlocked areas, reducing regional disparities as the economy modernizes (Cai, 2017). More importantly, BRI aims to export Sino technologies so that Chinese industry standards become a globally accepted benchmark (Cai, 2017). This enables China to expand its export markets and retain an upper hand in trade negotiations.

In line with Xi’s goal of “stable international order” (Xi, 2017), the new Silk Road also increases China’s global economic influence. As beneficiaries of BRI enjoy the increased economic activity created through the development of jobs, trade, and investment, it inevitably reorients more of the world’s economy towards China. Its status as a world leader is further solidified through the issuing of bonds in Chinese Yuan to finance BRI projects (“Advance China’s interests”, 2020), as this promotes the RMB as an international currency for further use in international financial institutions. This greater connectivity between the Middle Kingdom and other countries will empower it to leverage its influence to govern the economic affairs of BRI’s participants, and secure financial integration (“Advance China’s interests”, 2020). By fostering a greater reliance among participants on China’s economy, deeper political and cultural relations will be created, spawning a new international order centred around Beijing.

While recipient nations of the BRI have had generally positive reactions to the projects, the increased Chinese involvement in developing regions has been viewed suspiciously by some. The Sino-Indian conflict in particular has been strained by China’s investment projects in South Asia. While some fear that the new Silk Road will lead to the collapse of partnered states by leading them into a debt trap, Indian concerns primarily lie in the possibility that China might use its new allies to increase its military presence. The existence of these disagreements was on clear display at the Shanghai Cooperation Organisation Summit in 2019, when Modi refused to endorse Xi’s BRI, voicing concerns about China’s supposed lack of respect for “territorial integrity” (Purohit, 2019). In response Chinese state media have continued to urge India to “shed its China anxiety” for the benefit of all parties (Xinhua News Agency, 2017).

Source: Forbes

Before considering the possibility of Indian cooperation with China on the BRI, it is worth analysing the effects of Chinese projects in South Asia. Perceived threats to Indian naval hegemony are a significant reason for its opposition to the BRI. These concerns are driven by a number of controversial infrastructure programs, especially the Gwadar port in Pakistan and Hambanthota in Sri Lanka. As key strategic deep-water ports in the Indian Ocean, many in the Indian security community consider Chinese involvement in their development as being an attempt of “maritime encirclement” (Brewster, 2014). This is an understandable concern; Indian regional tensions have often been inflamed by Chinese meddling, specifically its sale of arms to Pakistan. Officially, China vehemently denies any military presence in Pakistan and Sri Lanka, stressing the purely economic nature of these investments (Brewster, 2014). Nevertheless, the Sri Lankan government has taken steps to mitigate regional flares by increasing its own military presence in the Hambanthota port (Wignaraja et al., 2020). This is an important move in assuring both domestic and international stakeholders in the “territorial integrity” are preserved by Sri Lanka. While it is unlikely that Indian concerns about the BRI will ever be completely resolved, it is essential that all recipient nations in volatile regions continue to demonstrate their sovereignty, and condemn any Chinese over-involvement. It would be unfortunate for beneficiaries of the BRI if the economic benefits are overwhelmed by geopolitical tension and uncertainty.

Moreover, broader concerns have been raised about the environmental impact and financial sustainability of the BRI, both for China and for partner states.

China is alleged to be engaging in a form of ‘debt trap diplomacy’, whereby countries are burdened with excessive debt so that economic and political benefits can be extracted when repayments are not made (Chellaney, 2017). On debt considerations, an analysis by the Centre for Global Development found serious concerns of debt distress amongst a number of borrower countries (Hurley et al., 2018). Taking on unsustainable amounts of debt would substantially inhibit lower-income countries’ finances, and undercut one of the BRI’s aims to be a development program. There are also potential risks for the host nation itself as a creditor when distributing a high volume of sizeable loans, particularly to countries who are likely to face credit risk themselves. If these risks are realised,  the consequences would dampen China’s ability to make further investments, and would then place a strain on their domestic economy and financial institutions. These concerns have been addressed by a ‘debt sustainability framework’ (Ministry of Finance of People’s Republic of China, 2019), but the plan needs to be met with a commitment to action and transparency in order to prove effective (Morris & Plant, 2019).

There are also concerns that the BRI has a negative environmental impact, which is particularly relevant in the broader climate change context. Inaction amongst BRI countries would result in a projected global warming increase of 2.7 degrees Celsius (Climateworks et al., 2019), which would far exceed the 1.5-degree limit recommended by the IPCC. Additionally, proposed transport projects have the potential to create significant reductions in biodiversity through their impacts on ecosystems (Hughes, 2019). This criticism aims to be addressed by ‘The Belt and Road Initiative International Green Development Coalition’ (UN, 2020), but comprehensive efforts will need to be made to ensure the BRI becomes environmentally sustainable long-term.

Ultimately, the BRI is a colossal undertaking with the potential to further propel China as a global superpower, forging a new age of global interconnection and collaboration. However, this is contingent upon their successful navigation of political and economic tension, addressing concerns of neo-colonial debt-trap diplomacy, and ensuring long-term financial and environmental sustainability.


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The CAINZ Digest is published by CAINZ, a student society affiliated with the Faculty of Business at the University of Melbourne. Opinions published are not necessarily those of the publishers, printers or editors. CAINZ and the University of Melbourne do not accept any responsibility for the accuracy of information contained in the publication.

Meet our authors:

Charlie Francis

Charlie is a Bachelor of Commerce student majoring in Economics and Finance. He is interested in macroeconomics, politics and current affairs.

Anuk Kariyawasam
Julia Hu
Ben Griffiths