- June 27, 2018
- Posted by: Marc Babel
- Category: Asia, Global Business
By Lynx Fellow Kathryn Walsh
The One Belt One Road Initiative (BRI), launched by Xi Jinping in 2013, is evidence of China’s expanding ambitions to increase its geopolitical presence and further establish its status as a geopolitical powerhouse. The extended, cross-continental reach of this project, paired with its link to China’s historical silk road is in line with Xi Jinping’s focus on Chinese rejuvenation, and presents immense economic opportunities for both China and all countries involved.
If the BRI is successful, China will have helped to establish the necessary infrastructure to help create an economic network stretching across multiple continents. China has already promised $4 trillion of investments in 65 countries, spanning across Asia and even reaching central Europe and parts of Africa. These countries contain 70 percent of the world’s population, 55 percent of the world’s GNP, and 75 percent of the world’s energy reserves . China hopes that its investments will help to improve and aid in the development of infrastructure throughout regions critical to the BRI, making China a driving force of regional economic prosperity.
There is a global need for infrastructure development, and China’s BRI has the potential to provide loans and projects to fill this void. If completed, China’s OBOR will help construct and improve transportation networks throughout several continents, and create a network directly linking Asia, Europe, and Africa. These projects appeal to countries that are lacking in domestic infrastructure needed to facilitate trade and draw in international business. China has provided loans that improve roads, railways, and ports, all crucial pieces of infrastructure that can help develop economic growth.
These projects are significant for the more than just the physical structures that they will create—the majority of BRI projects are funded through Chinese sponsored loans, and a significant amount of the contractors used to complete the projects are Chinese companies. Several countries are eager to accept loans from China to develop their own their local infrastructure, with the hopes of improving the prospects of their domestic economies. However the status and repayment of these loans has the potential to have lasting implications on China’s stake in key infrastructure throughout the region.
Chinese entities are often willing to provide loans that are deemed too risky by Major Development Banks. Chinese loans in these cases often come with high interest rates, which can present a risk for the lender. Countries that accept these loans run the risk that they will not be able to repay their loan according to the original terms. These cases can present opportunities for China to achieve more that just a financial stake in infrastructure projects. For example, when Sri Lanka was unable to pay the interest on its $1.3 billion loan, China was willing to take equity in the port the loan funded.  These terms have given China a vested stake in Sri Lankan infrastructure that will extend beyond the repayment of the loan.
Some critics warn that if Xi Jinping is not careful, China risks overextending its resources and capabilities throughout the region. Although China has successfully implemented mass infrastructure development domestically, bringing these strategies into an international context presents more factors and risks to be considered. Not all Chinese infrastructure projects have been well received by local populations, and there are several instances of local populations pushing back against Chinese investment projects due to claims of poor compliance with environmental standards and unfair labor practices.  Although many of these instances exist outside the scope of the BRI, these tensions show that Chinese led projects are not immune to risks and setbacks due to pushback from local populations, and that a warm reception to the BRI is not guaranteed.
A successfully implemented BRI could have immense long-term impacts on the region, increasing China’s international influence, and economic ties throughout Asia, Europe, and Africa. It is no doubt that the BRI has the potential to create increased economic opportunities for several countries through the creation of much needed infrastructure, however the success and lasting economic impact of these projects is not yet set in stone and will be influenced by the varied economic and political factors of each country involved.