The Geopolitics of China's Belt and Road

We saw in the last blog that China’s One Belt One Road (OBOR) has many purposes. From early on, China intended to use it as a lever for geopolitics, as Bruno Macaes writes in his awesome book, Belt and Road:

“Revealingly, the launch of the Belt and Road was accompanied by a process of merger and acquisitions enabling the creation of truly massive industrial conglomerates.”

State capitalism, in other words. With all “its associated power relations”.

 

Of course, all those countries on the New Silk Road need massive investments and loans for projects on the scale of OBOR. Between $4 trillion to $8 trillion by some accounts. No prizes who can lend on that scale? Yes, Chinese finance companies. In India, we rightly focus on the possibilities that affect us:

“Pakistan and Myanmar may become China’s California, granting it access to a second ocean (Indian Ocean) and resolving the Malacca dilemma.”

But the same OBOR financing structure creates risks for China: the risk of loan non-repayment ends up being a risk to the entire Chinese financial system. And:

“The more assets, investments and citizens of China abroad, the more time it will have to spend on thinking strategically about their security.”

And any such moves to “secure” them will throw China into conflict with the US, EU, India and Russia (who still consider Central Asia their backyard).

 

The possession of the Sri Lankan port for non-repayment of OBOR loans was a PR disaster for China. It raised huge security concerns in India, and to a lesser extent in the US. It spooked other OBOR countries as to what they might have to surrender if they defaulted, leading many of them to downsize the projects and change the terms of the loans midway. Even Pakistan, the “crown jewel of the initiative”, ran into problems – they’re behind on their loan repayments, the raw materials and heavy machinery that they had to import added to their debts, and their attempts to get an IMF bailout is actively resisted by the US.

 

China’s geographic location means it’s faster to access Europe through the ports of southern and eastern Europe (Trieste, Venice and Istanbul) than the traditional northern ports like Antwerp, Hamburg, London and Rotterdam:

“China may hope to change the spatial pattern of the container shipping system.”

But of course, such moves only raise fears in Europe that China is trying to use their own age-old policy against them: divide and conquer!

 

Like the Suez and Panama canals, China is considering the option of building a canal through the Kra Isthmus in Thailand. This idea though is unlikely to go through because the US views it as a channel through which the Chinese navy could deployed faster in the Indian Ocean, and Thailand itself may not want a “physical and symbolic meaning to the country’s division”.

 

The upside for OBOR countries is infrastructure creation. But, and this is key: it would only be in areas that suit China’s OBOR and geopolitical interests:

“One could say that under the Belt and Road, countries open their policy-making processes to other countries (aka China)… So this is not a structure that supports the future growth of these countries (in directions of their choice).”

Further, the investment channels are one-way:

“Reciprocal investments in China… continue to be limited.”

 

So yes, there are lots of challenges and dangers with OBOR. I am inclined to agree with Macaes’ conclusion on where things are headed:

“The Belt and Road may never become universal – just as the West never became universal – but in some areas it will rule unimpeded and different shades of influence will be felt everywhere.”