Washington, November 13 – The past week has seen the beginning of a U.S. response to China’s Belt and Road Initiative (BRI) – a trillion-dollar infrastructure play by Beijing to shape the economic and geopolitical future of the Indian Ocean rim and Eurasia. Speaking at the APEC CEO Summit in Vietnam on November 10, President Trump stated that the United States would "provide strong alternatives to state-directed initiatives that come with many strings attached." Center for a New American Security (CNAS) Asia-Pacific Security Program Senior Fellow Daniel Kliman and CNAS Bacevich Fellow Harry Krejsa have written a new commentary, “Responding to China’s Belt and Road Initiative,” to provide the United States, its allies, and partners guidelines for crafting a strategy toward this initiative.
Please find the full commentary below:
China is making a trillion-dollar play to shape the economic and geopolitical future of the Indian Ocean rim and Eurasia, and the United States needs a strategy for how to respond. The effort, called the Belt and Road Initiative (BRI), is an infrastructure-centric strategy that aims to link together parts of Asia, the Middle East, Africa, and Europe. Its primary maritime and land corridors encompass countries representing 65 percent of the world’s population and one-third of its economic output. The project has the potential to transform development economics for many countries, with China intending to spend $150 billion a year on investments in roads, railways, ports, pipelines, telecommunications networks, and other forms of infrastructure. It could also leave struggling governments permanently in debt to Beijing while building a China-centric economic and security order covering a major portion of the globe.
The United States and its allies and partners need to craft a coordinated approach to BRI – while learning from recent failures experienced in the face of other ambitious Chinese initiatives. In late 2013, a lack of imagination prevented the United States from anticipating the scope and consequences of Beijing’s land reclamation in the South China Sea, delaying a timely and vigorous response. After China launched the Asian Infrastructure Investment Bank (AIIB) in 2014, Washington miscalculated whether it could rally countries against Beijing’s now successful attempt to establish a new international financial institution.
The United States should neither underestimate China’s ability to implement the vision articulated for BRI nor downplay the appeal of BRI to countries in dire need of investment in physical and digital infrastructure. Going forward, the United States should take a nuanced approach. American strategy should shape BRI to align with accepted international norms and standards; pursue opportunities for selective cooperation with China; and compete where required to ensure that BRI does not lay the foundation for a new order, stretching from Southeast Asia to the African coast and from Central Asia through the Middle East, unilaterally defined by Chinese power. The following eight guidelines provide a basis for developing this strategy.
1. Avoid a purely oppositional approach
The United State should learn the lesson of its failed opposition to the AIIB: countries need new sources of investment, and are unlikely to be persuaded that they should reject additional opportunities for economic development based on abstract arguments over international principles. China’s BRI fills a void left by traditional international financial institutions. Moreover, BRI’s activities run the gamut from predatory lending to investments that would pass muster under global norms. In fact, AIIB has developed an initial reputation as a reputable lender, and investments made by AIIB – a small fraction of total financing for BRI – appear to bear this out. On the other hand, Chinese investments like those in ports and infrastructure in Sri Lanka, have funneled projects toward companies blacklisted by the World Bank and financed them with extortionate sovereign debt. BRI is not a monolith, and treating it as such will make it more difficult to impose necessary scrutiny on those investments that deserve careful review.
2. Offer a positive vision for development – one that includes China
The United States should advance an affirmative vision of high-quality physical and digital infrastructure linking together Asia, Africa, the Middle East, and Europe in shared growth and preparation for the economy of the future. Washington should emphasize that development financing should expand opportunities – not constrict national choices through unsustainable debt or degrade national sovereignty through terms that ultimately compel countries to cede control of critical infrastructure. American officials should articulate that they welcome a more connected Indian Ocean rim and Eurasia in which China serves as one of multiple major nodes in a network of physical and digital infrastructure constructed not only by China, but by a diverse set of states. They should also make clear U.S. expectations that China will elevate the quality of its investments to meet international financing standards, as well as commit to employing local labor and building up domestic industrial capacity in recipient states.
3. Place U.S. allies and partners at the center
The United States should seek to incorporate key allies and partners into the planning and execution of a strategy toward BRI. Their interests and concerns should inform and undergird a U.S. approach, not least because the United States alone cannot effectively respond to BRI given its vast geographic and financial scope. When identifying the most promising countries to involve in this effort, the United States should focus on allies and partners with sufficient resources and stature to chart their own approach toward BRI regardless of Chinese economic inducements or coercion. Here, Japan, India, Europe, Australia, and Saudi Arabia stand out. This collection of allies and partners will naturally have different perspectives and equities when responding to BRI, and the United States should provide a platform to facilitate information exchange and an alignment of approaches where possible.
4. Hold the line on high economic standards
A critical challenge posed by BRI is its potential to erode global economic standards as China hastens to fund a large number of projects across a vast geographic area. The United States should seek to make BRI cooperation with China contingent on maintaining these standards – from transparent investment procedures in accordance with the rule of law to ensuring projects align with guidelines for social and environmental sustainability. Deviating from these standards to compete with BRI may narrowly advance U.S. interests in specific countries targeted by China, but will ultimately undermine the rules-based order that a strategic response to BRI seeks to preserve. The United States should publicize where China’s actions fall short of global standards yet still be willing to recognize China when it elevates its behavior toward greater compliance with them.
5. Apply a geopolitical lens to BRI
Beyond its challenge to global economic standards, BRI has an important geopolitical dimension. Debt dependency created by Chinese investment renders countries vulnerable to Chinese economic coercion, and at the same time, port investments and other infrastructure projects have dual civilian-military use potential. With Beijing looking to expand its military reach overseas – China recently opened its first foreign base in Djibouti – the United States and its allies and partners should identify where a Chinese military presence would be most destabilizing and take action to prevent it or at least mitigate the consequences. For the United States, this will likely mean focusing more on BRI investments along the Indian Ocean rim than those in Central Asian states.
6. Test China’s willingness to cooperate
China has expressed willingness to open up BRI to participation by the United States and others. Washington and its allies and partners should identify and pursue a handful of projects to test China’s appetite for collaboration. Whether non-Chinese firms can successfully compete for projects, and the conditions subsequently imposed on them, will gauge to what extent there are opportunities to truly shape BRI in the direction of greater openness and adherence to international standards. If these initial pilot projects for cooperation show promise, the United States and its allies and partners should press for greater opportunities for their firms while maintaining vigilance to ensure that China does not use these “bright spots” to obscure backsliding. In contrast, if China’s expressed willingness to open up BRI fails to result in tangible cooperation, they should highlight its bad faith to the international community.
7. Employ U.S. influence and resources as a catalyst
The United States should buttress those institutions, organizations, and efforts that will strengthen demand for high-quality infrastructure financing in the face of lower-quality BRI projects. This will include strengthening collaborative initiatives like the Japan-India Afro-Asian Growth Corridor, which seeks to align investment interests between the two democratic Asian giants. Similarly, reinforcing existing visions for more exacting financing requirements, including Japan’s Partnership for High Quality Infrastructure and the European Commission’s call for BRI to follow “market rules and international standards,” should become a U.S. priority. These and other platforms could serve as channels for countries on the receiving end of BRI investments to quietly share their experience of dealing with China’s financing vehicles and develop best practices for taking on debt while upholding national sovereignty.
8. Do not overlook digital infrastructure
International attention has primarily focused on China’s efforts to build roads, rails, and ports across the Indian Ocean rim and Eurasia, yet digital infrastructure has emerged as a major element of BRI. Beijing has begun including communications connectivity in its investment plans. Chinese telecommunications giant ZTE is set to lay fiber optic cable lines as far away as Afghanistan, and a consortium involving Huawei Marine Networks recently launched a project to build an undersea cable network connecting East Africa and South Asia. Digital infrastructural investment by China could pose unique national security and human rights concerns, as Chinese companies have few qualms about exercising censorship, eroding online privacy, or intercepting trade secrets at the behest of the government in Beijing. Consequently, the United States and its allies and partners should consider launching a Digital Development Bank that would specialize in digital infrastructure and ensure that countries in the Indian Ocean rim and Eurasia have alternatives to a Faustian digital financing bargain with China.
In recent years, ambitious Chinese initiatives have too often caught the United States flatfooted. Now is the time to develop a strategic response to the Belt and Road Initiative in concert with key allies and partners. Following the above guidelines will help to avoid the mistakes of the past while laying the groundwork for an effective strategy that shapes BRI, cooperates with China selectively, and competes smartly where required. Absent a coordinated strategic response to BRI, large parts of the Indian Ocean rim and Eurasia could become the core of a new China-centric order in which many states have little choice but to follow Beijing’s lead.
Kliman and Krejsa are available for interviews. To arrange one, please contact Neal Urwitz at 202-457-9409 or email@example.com.