Moving forward, pushing back

A recent conference at Senate House explored how China’s ambitious OBOR initiative is impacting on Europe and beyond

Lack of transparency, the consequences of globalisation and the assertion of Chinese soft power were among the issues debated at The Democracy Forum’s February 5 seminar on China’s Belt and Road Initiative and its impact on Europe, which took place in the imposing Chancellor’s Hall at London University’s Senate House.

In his welcome address, TDF President Lord Bruce spoke of global fears of Chinese hegemony surrounding the BRI, and of China’s reassurances that the project is not a geo-strategic concept or military alliance but an economic co-operation initiative. Is it simply a trade and security network, he wondered, albeit a hugely costly one, or a ‘multi-headed hydra unashamedly aligned with national self-interest’? In light of the huge hike in Chinese investment in the EU in 2016, Lord Bruce considered the European Commission’s reaction to the BRI’s westward momentum and suggested that ‘surely such a visible extension of economic hegemony can no longer go unquestioned’. The essential challenge for the EU is to maintain a collective front, he said, concluding that we should perhaps be asking what China really wants from Europe, as it sees in Europe’s openness and wealth advantages for itself.

First Panel (L To R) Andrew Cainey, Theresa Fallon, Dr John Hemmings, Kathryn Rand
First Panel (L To R) Andrew Cainey, Theresa Fallon, Dr John Hemmings, Kathryn Rand

Introducing the first panel was chair Dr John Hemmings, Director of Asia Studies at the Henry Jackson Society, who highlighted the interlinkages between China’s foreign policy, aid, infrastructure, technology and sea-lane security – the geopolitical results of globalisation – and their impact on the global stage, as well as pointing out that the BRI presents opportunities as well as security challenges.

Theresa Fallon, Analyst, Centre for Russia Europe Asia Studies (CREAS)
Theresa Fallon, Analyst, Centre for Russia Europe Asia Studies (CREAS)

Theresa Fallon, Founder and Director of the Centre for Russia Europe Asia Studies (CREAS) examined Beijing’s Belt and Road diplomacy and Europe’s response to it, giving an overview of the BRI, Chinese investment in Europe, FDI screening, geopolitics and the public diplomacy of the People’s Republic of China. She compared China’s ‘ambiguous’ and ambitious BRI project with Europe’s more ‘rules-based, top-down’ approach to trade, and spoke of the problem of debt-trap, which has not only affected countries such as Sri Lanka (over the Hambantota Port) but also potential EU member states straddled by the BRI, including Serbia and Montenegro. As a result of debts to China generated by BRI projects, these countries will find it difficult to join the EU.

Ms Fallon also addressed the clash of values between China and Europe amid growing concerns that the BRI is an attempt to shape the world according to China’s interests. Shestressed the need for more transparency of Chinese companies operating within Europe, adding thatChina’s investment in the ‘16 plus 1’ is pulling certain EU and EU accession states further away from Europe,and explored aspects of its soft diplomacy, as well as touching on human rights dilemmas vis-à-vis Xi Jinping’s China and self-censorship in order to reach the Chinese market. China is shaping Europe much more than Europe is shaping China, she warned, and a divided Europe is an opportunity for Beijing. We must work hard to improve our democracies as the BRI is here to stay, and with regard to China, she concluded, ‘constructive vigilance is required’.

Reflecting on how the Belt and Road pushback might be made more productive, Andrew Cainey, Associate Fellow at the Asia-Pacific Programme, Chatham House, looked at how partner countries are pushing back on the BRI’s impact and terms. As the lynchpin of Xi’s foreign policy, the BRI is written into China’s constitution and Mr Cainey pondered the project’s successes five years in, given the many negatives such as cancelled, rejected and renegotiated projects in Africa and Asia. For all that, many countries were lining up to sign MOUs with China for the BRI, and China’s focus was on ‘quality’ projects.

While the BRI is meeting needs in emerging economies, with infrastructure investment a key enabler of economic growth, Mr Cainey said this came with major caveats, since financing is not on concessionary terms, and issues such as tackling corruption are major ones in China, as in many of the BRI countries. But the BRI’s ‘vagueness’ is an advantage for the West, not just for China, with opportunities for Western governments and multilaterals to latch on to the positives and push back on the negatives. On the notion of ‘productive pushback’, there is a need to be competitive both economically or societally, choosing where ‘China should not be the only game in town’ and ‘stiffening the sinews’ by capacity-building, governance and transparency initiatives in partner countries, and taking an integrated overview of fiscal and debt risk.

The implications of the BRI for the international rule of law was the focus for Kathryn Rand, Assistant Director at the Great Britain China Centre, who said an interesting aspect of the BRI was the nexus of politics and law. Under President Xi’s leadership the party state has been strengthened, with Xi utilising the law as an instrument of the party in order to govern more effectively but also more coercively. While China is focusing on judicial reforms and the professionalisation of the judiciary, it sees western independent judiciary as a threat to China, so reforms are not moving in the direction the West might wish – although, through the BRI, there is a huge uptake in outreach and connection between legal and judicial cooperation between countries on the Belt and Road. 

A huge challenge facing China will be the need to provide legal certainty for business, said Ms Rand, whilst also maintaining its political oversight of the judiciary. This was best represented by the establishment last year of the China International Commercial Court, which should not, said Ms Rand, necessarily be seen as a threat to legal systems elsewhere. She also discussed the digitisation of courts and China’s possible role in this globally, and the importance to China of endorsement for the Belt and Road by Western legal and judicial elites.

Second Panel Of Second Session (L To R) Andrew Small, Dr Pervez Hoodbhoy, Duncan Bartlett, Dr Sarah Ashraf
Second Panel Of Second Session (L To R) Andrew Small, Dr Pervez Hoodbhoy, Duncan Bartlett, Dr Sarah Ashraf

In the chair for the second session was Duncan Bartlett, creator of the Japan Story blog and Editor of Asian Affairs, who underscored the current significance of the seminar topic, calling it ‘one of the most divisive subjects in Asia’today, and commenting on perceptions of the BRI by both supporters and sceptics.

The BRI is a consequence of globalisation, which is itself a consequence of technology, said Dr Pervez Hoodbhoy, Zohra and ZZ Ahmed Foundation Distinguished Professor at Lahore’s Forman Christian College. Looking at the BRI in the context of the China-Pakistan Economic Corridor, he evaluated both China’s assertion that its BRI involvement with partner countries is purely on an economic basis, and its claims that the project will build local capacity and support sustainable development. He lamented the continuing lack of transparency about Chinese investments in Pakistan, failure to hire enough local labour, except in security, and spoke of complaints over Chinese companies operating in SEZs being untaxed.He also expressed concerns about the dearth of local goods which have been replaced by Chinese products and a lack of proper share in benefits for local people, questioned China’s inroads into the low-tech agricultural sector, and pointed to warning signs coming from Chinese purchase of land. So, while there have been enhancements in some industries, such as steel, local capacity is generally decreasing rather than increasing. Regarding sustainable development, Dr Hoodbhoy worried about massive Chinese coal mining projects impacting on water availability and producing air-polluting ash that affects local ecology, as well as the possible problems of two nuclear-powered plants currently being installed in Karachi.

While the BRI may be a purely commercial project elsewhere, Dr Hoodbhoy was doubtful this was true of Pakistan, as what is happening around Gwadar and Balochistan is more strategic. In conclusion, he said CPEC has the potential to offer genuine opportunities to Pakistan, but it is currently not being handled well or sensitively enough, and there is too much secrecy and government emphasis on the alliance with China. The BRI as a whole could also bring greater prosperity to the region, but only if it is placed in a better regulatory framework.

Andrew Small, The German Marshall Fund
Andrew Small,
The German Marshall Fund

Andrew Small, Senior Transatlantic Fellow atthe German Marshall Fund’s Asia Program looked beyond the backlash, asking whether Beijing could rebalance the BRI. Though he touched on the pushback from other major powers and in key BRI countries, he focused more closely on whether Beijing is capable of a serious adjustment, how far that is already happening, what shape such changes might take, and how we could respond. He spoke of how the BRI in many ways externalises much of what China has been doing itself internally for a long time, and called China ‘as good a poster child as any’ for ‘huge expensive infrastructure projects with questionable returns, problematic debt levels, corrupt practices and environmental issues’.

He too spoke of the debt trap affecting partner countries and how it is extremely damaging for China’s reputation. As well as censure from countries such as the US and India, there has been much criticism of, for example, the BRI’s lack of transparency from ally Pakistan, and from inside China itself regarding the project’s excessive nature. But there have been re-adjustments and rebalancing that have tried to reduce some of the criticism surrounding the original BRI – including paring back its scale and some debt rescheduling – while keeping much of the project’s initial thrust. Such developments matter because we are beyond what Mr Small called ‘the crushing narrative of inevitability’ on the BRI, which suggested that the CCP’s way of doing business was the only way. It is unclear what the new model BRI will be like, he concluded, but BRI version 1 – ‘the straight-up externalisation of the China model’ – is not going to work.

Dr Sarah Ashraf, Lecturer, London School of Economics
Dr Sarah Ashraf, Lecturer, London School of Economics

Dr Sarah Ashraf, Policy and Research Manager, Institute for Strategic Dialogue, viewed the shifting strategic imperatives of regional stakeholders in the BRI through a stability and security lens, exploring the implications of CPEC for local governance, transparency and accountability, and socio-economic polarisation. Describing the BRI as ‘less an institution with clearly defined rules, and more like a strategic vision’, Dr Ashraf considered changes to the international order, the ‘delayed impact of debt distress’, and argued that the EU must meet its Chinese counterparts at the same level, keeping several relevant factors in mind, such as learning how to compete with its own products in equal conditions, avoiding trade imbalances with China, and fomenting the creation and preservation of jobs in Europe following the acquisitions by Chinese companies.

Barry Gardiner Mp
Barry Gardiner Mp

Summing up, Barry Gardiner MP, Shadow Secretary of State for International Trade, spoke of the destabilising possibilities for China ofthe traffic that comes back along the BRI as pushback, the importance of focusing on the meaning of sustainable development,and how we are currently at a very difficult pointin the way we adjudicate international disputes. Europe must step up to the plate, he concluded, if it is to respond to the need for infrastructure with the same verve and imagination as the BRI.

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