On November 18, 2020, the Centre on Asia and Globalisation and the Asia Society Policy Institute organised a virtual roundtable to discuss the likely trajectory for China’s Belt and Road Initiative (BRI) in the aftermath of COVID-19 and in light of rising regional geopolitical competition, in particular between China and the US.
The three speakers were the Hon. Daniel Russel, Vice President, International Security and Diplomacy, Asia Society Policy Institute; Dr. Selina Ho, Assistant Professor at the Lee Kuan Yew School of Public Policy; and Prof. Min Ye, Associate Professor of International Relations, Boston University.
The event was held under the Chatham House rule, but the following points were made by presenters and participants during the discussion.
- When the BRI was first established, it lacked a clear strategic objective and had wide-ranging priorities including commercial interests, domestic economic considerations, and strategic ambitions. More recently however, the BRI seems to be undergoing a process of consolidation. It’s multiple disparate corridors—i.e. the Maritime Silk Road, Green BRI, BRI Space Information Corridor—are being gradually integrated into a single strategic vision.
- One doctrine intertwined with China’s BRI strategy is the advancement of civil-military fusion. Chinese laws mandate interoperability between overseas civilian infrastructure projects and military platforms, e.g. ports should be constructed to national defense requirements.
- BRI projects utilize the ‘port-park-city’ model, which has elements that can augment a port’s military utility, and digital intiaitves including “Safe Cities” and Smart Cities”, which provide Beijing with significant intelligence collection capabilities. These examples showcase how Chinese commercial activities can serve Beijing’s military objectives.
- China has established ports with dual use functionality in proximity to maritime chokepoints and sea lanes of communication. While they are not designed for warfighting, their location supports the PLA and PLAN military logistics network, expands intelligence collection capabilities and opportunities, and enhances China’s power projection capabilities.
- Through the Digital Silk Road and the BRI Space Information Corridor, recipient countries gain access to China’s satellite and communications networks and a range of other digital technologies, which further increases their dependence on Beijing, while reducing their dependence on the US and other Chinese competitors.
- China’s growing influence in the political, financial, military, and technological spheres point to the potential emergence of a ‘Sino-centric ecosystem’ that favors Beijing’s agenda and core interests. Many of these interests run counter to global rules and norms and could hamper America’s ability to operate effectively in the region.
- The formation of this ecosystem is not guaranteed, however. China is facing an economic slowdown and the COVID-19 pandemic has strained its resources. Beijing is also encountering growing domestic pushback over its investments in overseas projects. Moreover, with the post-COVID economic recession looming, more and more host countries are not going to be able to service their debts to China, particularly if their projects were unprofitable to begin with. And with Chinese SOEs and provincial governments increasingly in debt, Beijing will not be able to indefinitely sustain what many regard as “white elephants”, regardless of what objectives they serve.
- How different Southeast Asian governments respond to China’s infrastructure push depends on two key variables—(1) perceived legitimacy and (2) levels of political pluralism. States like Laos, where projects are seen to be legitimate for reasons of economic development but where there is low political pluralism, tend to welcome China’s involvement in projects. Others, for example Vietnam, with its emphasis on anti-China nationalism and strong dissenting voices within the government, would keep Beijing at arm’s length.
- Three conditions determine the bargaining power of Southeast Asian governments vis-à-vis Beijing—(1) their size, wealth, and geographic location; (2) state capacity; and (3) domestic politics and public opinion.
- Large countries (Indonesia) or those strategically located (Thailand) can negotiate for better terms. Governments with strong state capacity (Singapore), i.e. robust governmental institutions and regulatory powers, have stronger bargaining power as they have differing financing options and access to a wide-range of technical expertise. Governments facing domestic backlash actually have stronger bargaining power as they can ask for more concessions from Beijing to appease their local populace.
- Chinese projects have also faced a range of challenges in Southeast Asia. Working in countries with highly decentralized governing structures, such as Indonesia, requires having to negotiate with multiple regional- and district-level bureaucrats. Adhering to local legal requirements creates constraints, including having to abide by differing procurement, land usage, and environmental protection standards.
- Despite these problems, there is no sign that BRI projects in the region are slowing down. Project delays and work stoppages are quite common, but their effects are often temporary. Even the disruption caused by the ongoing COVID-19 pandemic has been brief, and work on most projects has already restarted. In fact, plans for new development projects are already in the pipeline.
- Within China, there have been major concerns over the BRI’s long term sustainability in light of the pandemic and increasing competition with the US. However, this challenging period may make the BRI all the more essential. The initiative could help rescue China’s economy by allowing it to continue pursuing globalisation and international trade on its own terms, without the US. Additionally, through the BRI, China can enhance it’s leadership role in multilateral cooperation, global health, and crisis management.
- Three major takeaways can be discerned from China’s recently unveiled Five-Year plan. First, China’s goal of doubling its economy by 2035 shows that economic growth will continue to be the main policy driver. Second, with the focus on “dual circulation”, Beijing will aim to enhance its image as a destination for global imports, investment and innovation, as well as expand its domestic market. New digital and physical infrastructure are already being planned, and sectors including finance are being liberalised. Major reforms are also taking place in areas such as land management, household registration, and urban development. Third is Beijing’s goal of enhancing its long-term security and sustainability. This includes adopting more resilient supply chains, both inside and outside China, indigenization of core technologies, and pursuing environmentally friendly policies.
- Moving forward, China’s BRI strategy is likely to have three areas of focus. First, the regional focus will be on Southeast Asia, which was China’s main developmental partner from 2013 to 2019. Second, there will be a greater focus on project risk management and protection of overseas Chinese assets. This may result in greater Chinese engagement in multilateral mechanisms and more robust Chinese military and security presence. Third, infrastructure development will move away from the grandiose and unpractical projects to more modest and sustainable ones that can help integrate the regional economies.
- Southeast Asia is likely to see an increase in debt as tourist revenues decline and the global economy struggles to recover. This may give multilateral lenders like the IMF greater leverage over governments in the region as debt restructuring and debt relief assistance becomes more important. These insitutions may become more assertive, such as demanding countries to be transparent over their debt obligations.
- Southeast Asian governments could seek to expand their infrastructure financing sources beyond China by identifying projects that can appeal to other regional partners, multilateral banks, donors, and the commercial market. ASEAN could pool its resources to help its members develop projects that are sustainable and commercially viable.
- Beijing’s decision to embark on the BRI effectively abandons the previous strategy of ‘hiding your capabilities and biding your time’. By revealing its intentions and capabilities, China has inadvertently contributed to the global pushback against its rise. As this strategy cannot be reversed, China will have to deal with the long term consequences moving forward.
- Other powers have a considerable interest in these issues, including Europe. Recently, the EU-Asia Connectivity Strategy was established to promote sustainability, long-term standards, and a level playing field in infrastructure investment. The EU sees China as both a partner and competitor. The EU is shifting towards a model of ‘Open Strategic Autonomy’ meaning that while it will continue to welcome economic engagement and cooperation with the rest of the world, it will take decisive steps to protect its own consumers and economies against “unfair practices”.
- Besides financing or building infrastructure, other countries can contribute to Southeast Asia’s development through other means. Australia, for example, finances technological cooperation programs aimed at providing regional governments greater access to technical expertise.
- Although the Trump administration undertook some developmental programs in the region, they have been undercut by Trump’s chaotic foreign policy and nationalism of ‘America First’. With the incoming Biden administration, the US has an opportunity to repair its ties with Southeast Asia. If the US coordinates infrastructure financing with other likeminded countries including Japan, Australia, and South Korea, it has an advantage over China, since they can share the financing burden while China would have to do it on its own.
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Participants
- Yusuke Arai, Chargé d'Affaires ad interim, Embassy of Japan in Singapore
- Prof. David Arase, Resident Professor of International Politics, Johns Hopkins School of Advanced Studies
- Prof. Kanti Bajpai, Director, Centre on Asia and Globalisation and Wilmar Professor of Asian Studies, Lee Kuan Yew School of Public Policy
- Blake Berger, Senior Program Officer, Asia Society Policy Institute
- Manu Bhaskaran, Founding Director and CEO, Centennial Asia Advisors
- James Carouso, Managing Director, Bower Group Asia
- Jassie Cheng, Research Associate, Centre on Asia and Globalisation, Lee Kuan Yew School of Public Policy
- Byron Chong, Research Associate, Centre on Asia and Globalisation, Lee Kuan Yew School of Public Policy
- Prof. Chong Ja Ian, Associate Professor, National University of Singapore
- Jesse Finkel, Acting Economic and Political Counselor, US Embassy in Singapore
- Dr. Alicia García-Herrero, Senior Fellow, Bruegel
- Paul Haenle, Maurice R. Greenberg Director’s Chair, Carnegie–Tsinghua Center, Tsinghua University
- Dr. Marina Jose Kaneti, Assistant Professor, Lee Kuan Yew School of Public Policy
- Dr. Prakash Kannan, Managing Director and Chief Economist, GIC
- Rana Karadsheh, Regional Industry Director Manufacturing, Agribusiness and Services Asia Pacific, International Finance Corporation
- Bilahari Kausikan, Chairman, Middle East Institute
- Khong Yuen Foong, Vice Dean (Research and Development) and Li Ka Shing Professor in Political Science, Lee Kuan Yew School of Public Policy
- H.E. Niclas Kvarnstrom, Swedish Ambassador to Singapore
- Liew Chin Tong, Senator in Dewan Negara, former Malaysian Deputy Defence Minister
- Dr. Adam Liu, Assistant Professor, Lee Kuan Yew School of Public Policy
- Dr. Ma Juan, Assistant Professor of Strategy, INSEAD
- Francesco Mancini, Associate Dean and Associate Professor in Practice, Lee Kuan Yew School of Public Policy
- Richard Maude, Executive Director of Policy, Asia Society Australia, and Senior Fellow, Asia Society Policy Institute
- Prof. C. Raja Mohan, Director, Institute of South Asian Studies
- H.E. Kara Owen, British High Commissioner to Singapore
- H.E. Barbara Plinkert, European Union Ambassador to Singapore
- Prof. Pu Xiaoyu, Associate Professor, University of Nevada, Reno
- Dr. Stephen Riady, Executive Chairman and CEO, OUE
- Dr. Ryu Yongwook, Assistant Professor, Lee Kuan Yew School of Public Policy
- Jyoti Shukla, Director, World Bank, Singapore Infrastructure and Urban Development Hub
- Prof. Simon Tay, Associate Professor and Chairman, Singapore Institute of International Affairs
- Prof. Wang Gungwu, Professor, National University of Singapore