THIRD BUT NOT LAST

Despite the active wars at two different locations on the other side of the Eurasian continent, threatening to shake the foundation of the international security system, Beijing hosted the Third Road Belt Forum (RBF) to mark the project's tenth anniversary. The forum was themed on High-quality Belt and Road Cooperation: Together for Common Development and Prosperity.

According to media reports, delegations from more than 130 countries and representatives of 30 international organisations have been invited to the forum. It was attended by 13 heads of state, seven prime ministers and one parliamentary leader. In comparison, the RBF II held on April 25-27, 2019 brought together representatives from 150 countries, including 40 heads of state.

The indicators suggest a declining interest of world leaders in this format. But was it really the case? It is difficult to answer the question unequivocally, either negatively or positively. Recent events have distracted many leaders from attending similar events. But those who do attend make it clear that for them the priorities are clear and cannot be questioned by prevailing circumstances.

In pursuit of leadership

For China, the Belt and Road Initiative (BRI) is very important. It reflects Beijing's strategic choice and is a system of political and economic agreements and treaties that form its political infrastructure. And it is so extensive and ambitious that it is openly opposed by Western countries, led by the US.

For China, the BRI is a complex mosaic of projects and routes to create additional opportunities for further economic growth. The conceptual vision of the project initially included the creation of an extensive network of railways, energy pipelines, highways and optimised border crossings both westwards towards Central Asia and southwards to Pakistan, South Asia and Southeast Asia. It is expected that the use of this transport network will expand the possibilities of using the Chinese currency, the yuan, in international settlements.

By the way, right after the RBF summit, the yuan replaced the euro as the second (after the US dollar) convertible currency in the top 10 SWIFT settlements, thus becoming officially the second world currency.

According to the 2018 estimate of the Asian Development Bank, the annual deficit of funding for infrastructure projects was more than $900b. The establishment of the Asian Infrastructure Investment Bank has significantly contributed to solving this problem and strengthened the yuan's position. After all, China prefers to settle mutual payments with partner countries mainly using national currencies.

In addition to contributing to the development of physical infrastructure, China has funded at least a hundred special economic or industrial zones offering thousands of jobs. It also encouraged the participating countries to utilise Chinese technological products, such as the 5G network powered by telecommunications giant Huawei.

In parallel with the announcement of the BRI initiative at the Association of Southeast Asian Nations (ASEAN) Summit in Indonesia back in 2013, Chinese President Xi Jinping announced plans to create the Maritime Silk Road of the 21st century. To boost the maritime trade, China has also announced its intention to invest in the development of ports along the Indian Ocean, from Southeast Asia to East Africa and parts of Europe.

On land and on sea

With the growing confrontation between the US and its regional allies and China, the latter realises that its competitors have much more opportunities at sea. Therefore, Beijing began to strengthen its maritime infrastructure (primarily commercial) mainly in the Indo-Pacific region. To a large extent, it has succeeded in doing so. Over the years, China has been able to secure access to key ports along the Indian Ocean, including Gwadar in Pakistan, Hambantota in Sri Lanka and Chittagong in Bangladesh. Apparently, this is not the limit.

China's overall ambitions for the BRI are staggering. To date, 147 countries, or two-thirds of the world's population and 40 per cent of global GDP, have signed up for Chinese projects or expressed interest in participating in them.

According to analysts, the largest of them is the China-Pakistan Economic Corridor (CPEC) worth $62b. It is a set of transport projects connecting China with the Pakistani port of Gwadar on the Arabian Sea. In total, China has already spent about $1 trillion on its initiative. According to other estimates, the amount may even reach as much as $8 trillion.

In addition to significant progress in redrawing trade maps around the world, China is also solving its internal problems, the main one being the disproportionate development of eastern (coastal) and western (inland) regions of the country. The Xinjiang Uygur Autonomous Region, for example, is one of the problematic regions of the country in terms of the ongoing separatist processes.

Promoting the economic development of this western province is a top priority. Same as the securing of long-term energy supplies from Central Asia and the Middle East, especially along routes connecting Western China with its energy-rich neighbours. One of them is Kazakhstan, which shares a long borderline with China.

It is no coincidence that Kazakh President Tokayev's visit to China to attend the RBF III has futher contributed to strengthening this relationship. In addition to more than $23b of cumulative Chinese investment in Kazakhstan, the two countries signed another 30 documents worth more than $16.5b.

Just business, nothing personal?

For China, the BRI is a commercially viable project, with loans close to market interest rates. At the same time, critics argue that some investments under China's global initiative involved non-transparent bidding procedures. As a result, contractors inflated costs, often leading to project cancellations and negative political reactions.

There are many such cases. For example, in Malaysia, former Prime Minister Mahathir Mohamad reassessed existing projects with China and cancelled deals totalling $22b. Later, however, he declared his "full support" for the initiative. Overall, estimates show that total debt to China has risen sharply since 2013, exceeding 20 per cent of GDP in some countries.

As the COVID-19 pandemic and the hostilities in Ukraine have negatively affected global markets, the number of low-income BRI member states is growing steadily. They are struggling to repay the loans associated with the initiative, which has triggered a wave of debt crises and renewed criticism of the BRI. In Pakistan, for example, imports needed to build CPEC infrastructure have contributed to a widening budget deficit, pushing Islamabad to request financial assistance from the International Monetary Fund (IMF). In Ghana and Zambia, high debt burdens partly made up of loans under the CPEC, led to sovereign default. However, many BRI member states do not have many alternatives. After all, Chinese loans, which are often provided at high interest rates, are the only way to get some money to finance infrastructure.

Azerbaijan, Russia, then everywhere else

However, this does not apply to everyone. Countries such as Azerbaijan, actively participating in the BRI project, do not need Chinese loans. It is important for Baku to receive preferences from its participation in the project as a full partner, not as a recipient of Chinese aid.

To some extent, this also applies to Russia, which due to Western sanctions views cooperation with China as a kind of window to the world—both literally and figuratively.

This was also confirmed by the visit of Russian President Vladimir Putin to China. Over the past year, Russia has become the second trading partner of China after the US, with $200b-worth trade turnover, which is almost three times behind the US indicator. China has become the major market for main Russian export commodity—energy. For Russia, China is also a strategic partner to solve the existing geopolitical issues. Earlier, President Vladimir Putin made a public statement where he underlined that "major centres of economic and political power and influence are emerging in the world, which are asserting themselves more insistently, demanding that they be reckoned with". Russia sees China as a partner to materialise its global mission of creating a counterweight to Western financial and political mechanisms amid the so-called global South.

Either way, the Chinese BRI initiative is going through an effectiveness test amid the ongoing shifts in world politics. One could judge this by the countries whose leaders did not attend the recent BRF III. These include Kyrgyzstan, although the Kyrgyz Transport Corridor is a key corridor for the BRI, and Tajikistan, which has been implementing a project to build the Dushanbe-Khorog-Kulma road important for the region.

Heads of the Middle Eastern countries (except for Egypt and the UAE) did not attend the summit either. Some of them actively visited Beijing this year and participated in the China-Arab countries summit, while some do not want to aggravate relations with the US amid the ongoing hostilities between Israel and Palestine.

There was almost no one from South America, which is also an extremely worrying signal for Beijing. In fact, Chinese investment in the region has halved, which probably explains the absence.

There were very few representatives from African countries at the BRF III. This may be due to the growing confrontation between global players in Africa and their reluctance to openly demonstrate geopolitical preferences.

The only major Western country, Italy, has joined the initiative in 2019, effectively shocking the G7 members. Recently, Rome joined the Partnership for Global Infrastructure and Investment (PGII), an initiative announced at the G7 summit to finance infrastructure projects around the world. It also includes the new India-Middle East-Europe Corridor (IMEC) unveiled in September at the G20 summit in New Delhi and seen as a counterweight to China's BRI.

However, the IMEC economic corridor is just a plan, while the BRI is a reality that has passed the test of time. Not an easy time, but an interesting one.