<p>China’s Belt and Road Initiative (BRI) was conceived along the lines of the ancient silk road, a network of Eurasian routes that served the interests of trade, under the Han dynasty, from the 2<sup>nd</sup> century BC until the 15<sup>th</sup> century AD. The road spanned some 4000 miles playing a critical role in economic, cultural and social exchanges between Europe and Asia. China exported silk, textiles, tea, porcelain and philosophy in exchange of food produce and horses. The BRI was launched to engage with countries in Europe, Asia and Africa, where China provided funding for infrastructure projects, with the view to establishing its dominance over global trade. As the world’s second largest economy and the largest trading nation, it felt its time had come to secure its position as the emerging global power. </p><p>On paper, the BRI comprised an ambitious plan to connect parts of the globe through land and maritime routes, as the basis for trade. In reality, results have been mixed. Some countries benefited from China’s financial clout; still others, have fallen into a debt trap and a vicious cycle of dependency. A high-profile project under the BRI is the China Pakistan Economic Corridor (CPEC), which hoped to ensure that Pakistan provides a key transit route for the shipment of goods to the Middle East. Beijing funded road construction, power projects and port development, but at an unsustainable price. As its external debt rose, Pakistan’s options for economic independence reduced. It is now in a debt trap. Its government has had no choice but to go cap in hand to the IMF for a bailout. What was meant to bring in economic prosperity has ended up as a journey to hell.</p><p>Interestingly, these misadventures are not a one-off. Sri Lanka too has had to grapple with a similar dilema. The Hambantota Port, during its design stage, was presented as an exciting opportunity for Colombo. However, it turned out to be a dreadful liability. At a cost of USD 1.2 billion, funded not through development aid, but rather risk-adjusted market-based pricing. The subsequent commercial settlement involved Sri Lankan authorities handing over Hambantota to the Chinese, in an unpalatable debt-for-equity swap. With absolute control over Hambantota, China now exercises domination over a strategic asset in the Indian Ocean with both civilian and military applications. Sri Lanka, on the other hand, has lost sovereignty over its own territory.</p><p>Laos, a small country along the Mekong, has through BRI projects, ended up a vassal state. It partnered with China to construct a USD 6 billion rail system to connect its capital to the Yunan province. The temptation to engage was based on the promise that better connectivity would lead to investments in projects along the way. Sadly, none of that materialised and Laos was left in an unsustainable debt trap. With no other sources of funding and a massive debt-to-GDP ratio, it has been forced to submit its economic sovereignty to the Chinese government.</p><p>These examples are not hidden and other countries have begun to realise that plans do not turn out as promised. Social push-back and rising political opposition are putting the lid on BRI projects. Governments have reconciled to accepting the truth that funding through multi-lateral organisations such as the World Bank are easier to handle and the preferred route. This is despite the fact that they come with strings attached on humanitarian issues. China, on the other hand, does not really care about these and is actually more comfortable in dealing with authoritarian states. Now, China has accepted the unsustainability of this strategy and seeks to continue with the BRI but in a different format. Henceforth, its projects are likely to be much smaller and more transparent. The BRI is not dead but will morph into a changed, and more acceptable, avatar.</p>
<p>China’s Belt and Road Initiative (BRI) was conceived along the lines of the ancient silk road, a network of Eurasian routes that served the interests of trade, under the Han dynasty, from the 2<sup>nd</sup> century BC until the 15<sup>th</sup> century AD. The road spanned some 4000 miles playing a critical role in economic, cultural and social exchanges between Europe and Asia. China exported silk, textiles, tea, porcelain and philosophy in exchange of food produce and horses. The BRI was launched to engage with countries in Europe, Asia and Africa, where China provided funding for infrastructure projects, with the view to establishing its dominance over global trade. As the world’s second largest economy and the largest trading nation, it felt its time had come to secure its position as the emerging global power. </p><p>On paper, the BRI comprised an ambitious plan to connect parts of the globe through land and maritime routes, as the basis for trade. In reality, results have been mixed. Some countries benefited from China’s financial clout; still others, have fallen into a debt trap and a vicious cycle of dependency. A high-profile project under the BRI is the China Pakistan Economic Corridor (CPEC), which hoped to ensure that Pakistan provides a key transit route for the shipment of goods to the Middle East. Beijing funded road construction, power projects and port development, but at an unsustainable price. As its external debt rose, Pakistan’s options for economic independence reduced. It is now in a debt trap. Its government has had no choice but to go cap in hand to the IMF for a bailout. What was meant to bring in economic prosperity has ended up as a journey to hell.</p><p>Interestingly, these misadventures are not a one-off. Sri Lanka too has had to grapple with a similar dilema. The Hambantota Port, during its design stage, was presented as an exciting opportunity for Colombo. However, it turned out to be a dreadful liability. At a cost of USD 1.2 billion, funded not through development aid, but rather risk-adjusted market-based pricing. The subsequent commercial settlement involved Sri Lankan authorities handing over Hambantota to the Chinese, in an unpalatable debt-for-equity swap. With absolute control over Hambantota, China now exercises domination over a strategic asset in the Indian Ocean with both civilian and military applications. Sri Lanka, on the other hand, has lost sovereignty over its own territory.</p><p>Laos, a small country along the Mekong, has through BRI projects, ended up a vassal state. It partnered with China to construct a USD 6 billion rail system to connect its capital to the Yunan province. The temptation to engage was based on the promise that better connectivity would lead to investments in projects along the way. Sadly, none of that materialised and Laos was left in an unsustainable debt trap. With no other sources of funding and a massive debt-to-GDP ratio, it has been forced to submit its economic sovereignty to the Chinese government.</p><p>These examples are not hidden and other countries have begun to realise that plans do not turn out as promised. Social push-back and rising political opposition are putting the lid on BRI projects. Governments have reconciled to accepting the truth that funding through multi-lateral organisations such as the World Bank are easier to handle and the preferred route. This is despite the fact that they come with strings attached on humanitarian issues. China, on the other hand, does not really care about these and is actually more comfortable in dealing with authoritarian states. Now, China has accepted the unsustainability of this strategy and seeks to continue with the BRI but in a different format. Henceforth, its projects are likely to be much smaller and more transparent. The BRI is not dead but will morph into a changed, and more acceptable, avatar.</p>
