Driving nations into debt
Countries linked to the Belt and Road Initiative increasingly question Chinese interests in projects supported by the Initiative. They fear that the AIIB is a political and geopolitical tool of the Chinese government. These doubts are reinforced by a recent report from the Center for Global Development showing that the BRI will not only provide infrastructure development to other nations, but will fulfill China’s important economic, foreign policy, and security goals.
The U.S.-based think-tank finds that several countries helped by the BRI incur high risk of bankruptcy due to the BRI financing. Among the 68 countries analyzed, 23 countries tend be very vulnerable to indebtedness. The situations in eight countries (Tajikistan, Laos, Maldives, Djibouti, Kyrgyzstan, Pakistan, Mongolia, and Montenegro) are extremely worrisome. India's Economic Times pointed out that four of these eight nations are neighboring nations of India and increasing debt will lead to increasing political costs in India. The Central News Agency claims that China's strategy is very simple and straightforward; when a small country is unable to pay its debts, China will claim ownership/use of the project and land.
The Center for Global Development recommends that international financial institutions, such as the World Bank, oblige China to respect international norms for loans. Read more here and here.
The Belt and Road Initiative
Europe disagrees with China's Vice Foreign Minister Wang Yi claim that all nations are equal in power and dominance in the Belt and Road Initiative. According to many European nations, China adopted the BRI to create a new international order, and many countries are against endorsing this initiative. In February at the Munich Security Conference, former German Minister of Foreign Affairs Sigmar Gabriel stated that Western nations should begin developing countermeasures to the BRI. Gabriel pointed out that China is currently the only country with a global geopolitical strategy, and its ideals are vastly different from Western values of democracy, freedom, and human rights.
The ambitious BRI is meant to connect Asia with Africa and Europe through Chinese financing and building a series of ports, railways, highways, pipelines, power plants and mines. FAZ's South Asian business correspondent Christoph Hein criticizes Chinese investment institutions, especially the Chinese Development Bank and the Export-Import Bank, for not being transparent about their lending practices. Up to eight countries in the region will be hit hard by debt from these development projects, especially Sri Lanka, Pakistan and Djibouti, according to the reporter.
US business growth
The growth of China's Belt and Road Initiative has attracted investors from around the world, including from the United States. At least 15 companies based in the United States have cited the Belt and Road Initiative as a potential opportunity for facilitating greater business growth. Specifically, companies like Honeywell have expressed interest in utilizing regional development programs to invest in emerging markets across Asia.
Increased real estate investments
Investment in large infrastructure projects has led to a boom in property markets across South and Southeast Asian countries. Specifically, investment in real estate through the Belt and Road Initiative in Southeast Asia and South Asia reached 2.5 billion USD in 2017, and the total real estate investment value reached 39.5 billion USD in 2017, which represents a sevenfold increase from 2012 and an 8 percent rise year-on-year. These investment trends have re-enforced optimism that the Belt and Road Initiative will stimulate growth in wealth and enhance existing investment possibilities.
According to Chinese Minister of Commerce Zhong Shan, trade volume between China and countries along the Belt and Road amounted to 1.1 trillion USD in 2017, up 14.8 percent year-on-year. Zhong also praised China's more diversified investment portfolio, and steady progress on major projects such as railways, expressways and ports, manufacturing operations, and energy programs. In the future, China hopes to promote e-commerce through big data, and embark on multilateral trade and investment liberalization policies.
Asian Development Bank updates
Cambodia to Tajikistan
The ADB acquired 190 million USD from the Green Climate Fund (GCF) for climate funding in Cambodia, Mongolia, and Tajikistan. Cambodia is receiving 30 million USD in grants and 10 million USD in loan for agribusiness, while Mongolia is receiving 50 million USD in grant and 95 million USD in loan for urban eco-districts. Meanwhile, Tajikistan is getting a 5 million USD grant and loan to bolster the State Agency for Hydrometeorology, the national weather forecasting entity.
The ADB and the International Solar Alliance (ISA) signed a cooperation agreement to support solar power development in Asia and the Pacific. Both groups will collaborate in developing solar projects in the region and sharing research. ADB's current energy policy has 3 billion USD committed per year by 2020 for clean energy.
ADB is loaning 140 million USD to Pakistan to improve roads in the northwestern region of Khyber Pakhtunkhwa for the KP Provincial Roads Improvement Project. 214 km of roads will be improved with higher safety and climate resilience. The project, supported with an additional 24 million USD from the Government of Pakistan, is planned to be completed by 2022.
ADB is loaning 35 million USD to Gulf Chana Green Company Limited (Chana Green) for a biomass power project in southern Thailand. To meet increasing power demands, the project will have Chana Green use ADB's financing to construct a 25 MW biomass power project that will convert waste from rubber trees into renewable energy. Chana Green is wholly owned by Gulf Energy Development (GED), a leading private sector power generation company in Thailand.
Chinese investments in Europe, Latin America, and Africa
Spain holds interest in China’s interconnected strategies. Spain joined the AIIB in 2015, subscribing nearly 1.8 billion USD to the Bank and promoting their interests in infrastructure and engineering firms. China incorporated Spain in the Belt and Road Initiative when Madrid was chosen as the destination for a railway system "pilot test". After claimed success, the two nations wish to increase shipments via the railway line and improve conditions of the railway system that originates in China.
Zijin Mining Group, a Chinese company, recently expressed interest in purchasing RTB Bor, a Serbian copper mining and smelting company. Serbia intends to sell the mining complex to erase the debt problems it raises, after facing losses since the Balkan wars. As a precondition, potential buyers would first need to contribute between 300 and 330 million USD. Serbia is a part of the BRI, which is likely a motivating factor in the expressed possible purchase.
The Chinese Communications Construction Company (CCCC), along with the Brazilian companies WPR and Lyon Capital, announced the construction of the Sao Luis port. CCCC will supply 51 percent of the 245 million USD investment needed to complete construction. The port aims to support regional growth, creating 4,000 jobs and facilitating movement of 10 million tons per year.
Uganda President Yoweri Museveni inaugurated an industrial park financed by China. This park aims to create more than 15,000 jobs. Museveni also praised Chinese support in the country, up until late 2017, Uganda received 219 millions USD of Chinese direct foreign investments.
A confirmed leak revealed that the Chinese Investment Association plans to create a "International Blockchain Investment Development Center" to organize industry standards and alliance and introduce Blockchain investment funds. The center would link international funding to a Chinese state-run Blockchain system, likely contributing to governmental spending.