The Belt and Road Initiative (BRI), mooted by President Xi Jinping of China in 2013 as an ambitious infrastructure project aimed at global trade connectivity, has generated interest and acceptability among many nations. China has announced it as an economic cooperation initiative, though it is widely perceived as an economic, political and strategic thrust by China at global level.
The precise number of projects under BRI is still fluid, as these are being worked out informally between the investors and the recipient countries. As of now, it mainly comprises of many economic corridors slated for completion by 2049, to coincide with the 100th anniversary of the establishment of the People’s Republic of China.
China Pakistan Economic Corridor (CPEC), announced in 2015, is a 62 billion USD endeavour. In addition to CPEC, the Bangladesh-China- India- Myanmar (BCIM) corridor and China- Indo China Peninsula Economic Corridor (CICPEC) are the most relevant as far as Indian interests are concerned. The New Euroasia Land Bridge Economic Corridor (NELB), China- Mangolia- Russia Economic Corridor (CMREC) and the China Central Asia- West Asia Economic Corridor (CCWAEC) are also being conceived for implementation in our neighbourhood.
The BRI encompasses infrastructure investments in the elds of construction, sea and land transport, communication, power and energy across large number of countries in Asia, Europe, Africa and Latin America.
The key areas of cooperation include synergising development activities, forging financial cooperation to upgrade infrastructure facilities and communication, give boost to trade relations, besides promoting social and cultural exchanges between various nations.
When Xi Jinping formally announced the Belt and Road Initiative six years back from Kazakhstan, not many could foresee its reach and wide acceptance across many countries and continents. Several Asian, European, Caribbean and Latin American nations have signed MOUs to be part of the initiative.
Italy first G7 nation to endorse BRI
BRI got a big boost when Italy endorsed BRI in March this year, becoming the first among the G7 countries to do so. As part of Italy’s stamp of approval, 29 deals were clinched aimed at Chinese investors pumping in $2.8 billion – particularly in developing port infrastructure in Genoa, Palermo and Trieste aimed at cross continent connectivity and China’s economic integration with Europe.
Italy, which is facing economic problems, believes that the deal will result in increased exports to China and will help in reducing national debt, which is among the highest in Eurozone. Following Chinese investment Piraeus, the Greek harbour port, saw a steep rise in its growth. It rose to be globally the 38th largest container port in 2017 from ranking 93rd in 2010. This has raised expectations among many countries in the BRI. China, on the other hand, hopes for faster access to Europe to find newer markets for increasing inventory of Chinese products at home – giving a boost to slowing domestic growth and nearly stagnant exports.
Panama was the first Latin American nation to sign MOU with China to promote BRI. China did not have diplomatic relations with Panama until 2017, even though it has extensive trade interests linked to Panama Canal, being its second largest user. President Xi Jinping was successful in getting Panama on board, rst to establish diplomatic ties and then sign the MOU on BRI. During his visit to Panama last December, large number of agreements were signed between the two countries on forging and strengthening economic ties, cooperation in the fields of science and technology, education, social and cultural relations and exports of Panamian goods to China.
Shortly after establishing diplomatic relations, President Juan Carlos Varela of Panama had visited China in November 2017, taking along a team of businessmen, scholars and media persons to take forward the new bonhomie between the two nations and explore and identify all areas for “win- win cooperation”. The Panama Canal, linking the Atlantic and Pacific Oceans, is the busiest trade artery. Geopolitically and also strategically, it is vital to both to China and America. Expectedly, USA has labeled Chinese ventures in Europe and Latin America as “predatory economic activities with other countries”.
China is using its economic power and making it difficult for European countries to resist Chinese investment at a time of economic troubles in European Union. The enormous expenditure under each of the projects, coupled with ever increasing number of projects under BRI and China’s willingness to extend loans to various nations to meet the costs, reveals its economic and industrial might and its ambition to spread political and strategic infuence globally.
CPEC undercuts India’s political, strategic interests
CPEC is by far the most relevant BRI project involving India’s political and strategic interests. The cost of various rail, road and power projects was initially pegged at USD 46bn, which got revised to USD 62bn in 2017. Pakistan recently cancelled the Rahim Yar Khan power project, part of CPEC, amid fears of rising debt. CPEC is funded by China
Development Bank, Exim Bank of China and Industrial and Commercial Bank of China, besides the two main funding agencies set up by China for the purpose, viz Asian Infrastructure Investment Bank (AIIB) and Silk Road Fund. Recent trends indicate growing scepticism over funding costs of BRI projects.
The projects under CPEC will virtually extend over the length and breadth of Pakistan. It will cover Baluchistan, Gilgit Baltistan, Khyber Pakhtunkhwa, Punjab and Sind in Pakistan, besides linkage to Xinjiang in China. The seaports of Gwadar and Karachi will get linked to northern Pakistan, western China and central Asia. CPEC also involves relaying and rebuilding of the Karakoram Highway from Hasan Abdal to Chinese border. The 1100-km highway between Lahore and Karachi and the upgradation of the Karachi-Peshawar railway line to nally connect with Xinjiang are part of the Initiative. Power generation projects
worth USD 33bn to overcome electricity shortage and laying of pipeline to transport gas from Iran are included.
China is keen to get India on board and be part of BRI. However, India has concerns and unanswered questions which prevent its participation in this global effort mainly financed by China through provision of interest-bearing loans from various Chinese institutions and banks. Consequently, India did not participate in the first Border and Road Forum for International Cooperation in 2017. The second meet scheduled for April 25-27 was attended by representatives of over 100 countries, including around 40 leaders of various governments.
Russia, the big neighbour of China, participated.
Indian Ambassador to China Vikram Misri said CPEC “ignores core concerns on India’s sovereignty and territorial integrity”. He added: “India shares the global aspiration to strengthen
connectivity and it is an integral part of our economic and diplomatic initiatives. We ourselves are working with many countries and institutions in our region and beyond on a range of connectivity issues”. However, the connectivity issues must be based on universally recognized international norms, good governance and rule of law, he added. Consequently, India rejected the invite for the second meet being hosted by Beijing.
The China Pakistan Economic Corridor (CPEC) runs through disputed Pakistan Occupied Kashmir, illegally retained by Pakistan after the war in October 1947. The state of Jammu & Kashmir, like 562 other princely states, acceded to India through an instrument of accession at the time of the partition of British India into two sovereign countries of India and Pakistan. Pakistan came to retain over 83,000 sq. km of this former princely state through a United Nations-enforced Cease Fire. Out of this, in 1963 Pakistan ceded over 5000 sq. km. Shaksgam valley of Gilgit Baltistan to China, despite the fact that Pakistan itself was in illegal occupation of this land. China, after the 1962 war with India, further occupied over 37,000 sq.km. of Aksai Chin in Ladakh region of J&K.
India was left with less than half of the Jammu & Kashmir which had acceded to India through a proper and legally valid instrument of accession, signed in October 1947 by the state’s ruler Maharaja Hari Singh and the Indian Government. In 1994, the Indian Parliament unanimously adopted a resolution declaring the pre- cease re undivided state an integral part of India, thereby reiterating India’s stated position on Jammu & Kashmir. China again rubbed India on the wrong side by entering into MoU with Pakistan for building the corridor without consent or consultation with India – an act against internationally accepted norms. To expect that a democratic country of 1.25 billion people will become part of CPEC will undermine India’s stand on J&K, which it has maintained right from 1947. It will also project India as a weak nation not able to defend its valid and legitimate interests. This will amount to a huge letdown of the people by the government. India cannot afford it, despite the economic advantages that BRI may have to offer.
BRI’s debt trap for partner nations
Many smaller nations where projects under BRI have taken off have started accumulating huge debts. Venezuela has accumulated a debt of $62bn. Brazil, Argentina and Ecuador have piled up debt to the tune of $42bn, $18bn and $17bn respectively in execution of BRI projects till last year, raising the prospect of these many similarly placed countries coming under debt trap. China, on its part, has marketed BRI as a huge opportunity for economically troubled nations to kick-start and revive their sagging economy with a forecast of turn around and job creation giving a big boost to GDP. To make the deal sweeter, funding requirements have been arranged through Chinese government- backed institutions and banks.
The interest rate for the loans for funding these projects is significantly higher than the soft loans extended by developmental institutions like World Bank and IMF. Besides the loan repayment, defaulting nations run the risk of losing ownership of projects and immovable assets like land or ports, as happened with Sri Lanka. It had to part with Hambantota Port, and leased it to China for 99 years in lieu of the loan extended to it for developing the port. China thus got the much-needed foothold at a vantage point to control its maritime trade through Indian Ocean.
Of late, there is global skepticism about the implications of the huge funding involved in the BRI projects. For China, BRI is a convenient channel to export its surplus capital, generated and accumulated over decades of export-led investment, to pro table outlets. BRI will facilitate and establish new markets for goods manufactured in China. Two ends of Euroasia, Africa and the oceans are planned to be economically integrated with China along with the Silk Road economic belt and the maritime silk road.
Beyond economic strategy, China has taken the BRI route to signal a paradigm shift in its foreign policy. Beijing’s thrust to build ports and other trade facilities in Latin America has raised alarm in Washington. Russia, USA, Japan, India and other nations are skeptical at the prospect of China gaining economic and strategic advantage at their expense, and making inroads in their traditional regions of influence.
Right from the days of Europe’s exploratory sea voyages in late 15th century towards the West by Christopher Columbus (1492) or to east by Vasco da Gama (1497-99), ocean routes have been dominant for world trade. Domination by recognized western powers has been a key feature of the global system that China, through this initiative, wants to reverse or at least dilute.
China using BRI as a exible tool
China initiated BRI projects with Malaysia in order to gain influence in Malacca Straits. The new Malaysian government announced cancellation of some BRI projects due to debt concerns. China responded by slashing the cost of a major rail project by 30%. CPEC will give China direct access to Arabian Sea. Taking cue from Malaysia, the Imran Khan government in Pakistan wants to renegotiate CPEC cost due to fears of mounting debt. BRI projects in Maldives have put the nation in debt equal to two-third of its GDP. BRI projects in Sri Lanka resulted in the surrender of Hambantota port to China for 99 years.
China’s BRI ventures in Myanmar and Bangladesh aim to secure in uence in Bay of Bengal and Indian Ocean. In Latin America, BRI has enabled China to gain strategic foothold in Panama Canal and two most important oceans on either side of America. These are part of Chinese efforts to dilute the dominance of western powers on global trade routes. The import of Chinese work force in these countries has belied their expectation of jobs creation. Critics allege opacity in the financial deals, and a deliberate attempt by China to impose financial imperialism on economically weak but strategically located nations. World Bank has said that BRI comes with “potential bene ts and risks”. Noted economist Michele Ruta cautions that for some countries, “the financing required for BRI projects may expand debt to unsustainable levels”. The bigger projects carry “environmental, social and corruption risks”, especially in countries with weak governance.
India must continue to study BRI closely
Given the implications encountered by countries implementing BRI projects, India’s participation or otherwise in BRI will require an in-depth analysis of the terms and conditions on offer by China. We will have to take into account India’s security, and also strategic implications of the intended projects in India and neighbouring countries.
The projects undertaken by China under BRI in Pakistan, Myanmar, Bangladesh, Maldives and Sri Lanka have negatively impacted India’s defense, strategic and maritime interests. India has many unresolved issues with China. These have the potential of escalation if not resolved permanently as per internationally accepted norms and in the spirit of good neighbourly relations.
The unresolved border issues between India and China have been a cause of concern since decades. India has a well de ned position on the Doklam issue. China is trying to distort the issue and create uncertainty in our north-eastern states. This has the potential to disturb the integrity of our nation. China’s territorial claims over Arunachal Pradesh, raising questions on Sikkim’s integration with India, occupation of Aksai Chin in Ladakh are issues where China needs to understand and appreciate India’s view point before we can take BRI as a genuine Chinese effort vis-à-vis India.
Our galloping trade deficit with China is now a major cause of concern for the government. From $16bn in financial year 2007-08, the trade de cit vis-à- vis China rose sharply over the last decade, and reached $59.3bn in 2017. For any country, whatever its size of economy, a huge trade de cit can have serious implications on its economic independence.
The Indian government has impressed upon Beijing to increase Indian imports, and has identi ed areas where the increasing de cit can be scaled down. Under pressure, China agreed to take measures to bring de cit gradually to respectable levels. Consequently, trade de cit in 2018 got reduced to $57.4bn from $59.3bn in 2017. Indian Commerce Minister Suresh Prabhu celebrated the figures with a tweet, calling it “whopping, unprecedented reduction” in trade deficit with China.
But it turns out that China may be camouflaging trade figures. While trade de cit with China has reduced by $1.9bn, our trade surplus of $3.9 bn with Hong Kong has turned into trade de cit of $2.7bn. Interestingly, during 2018 there has been a sharp rise in Hong Kong’s exports to India of same goods that saw a reduction of Beijing’s exports to New Delhi compared to 2017. There has been re-routing of Beijing’s exports to Delhi via Hong Kong. Consequently, the combined
trade deficit of China and Hong Kong has risen from $55.4bn in 2017 to $60.1bn in 2018. So much for the honesty of purpose displayed by China in its trade dealings with India.
China’s support in listing Masood Azhar a positive move
Since 2009, China at the behest of terror sponsoring Pakistan, blocked the UNSC move four times through “technical hold” to declare Azhar Masood a global terrorist. Frustrated US decided to “use all resources to ban Azhar Masood” so that he is “held accountable for terror attack on India” and announced to move a resolution in UNSC. France, UK and all other members had earlier backed the move to declare Azhar Masood a global terrorist, which had landed China in isolation. A discussion on resolution in Security Council would have exposed China’s duplicity on fighting global terror and projected it as a terror-supporting rather than as a terror-opposing nation. On May 1, under international pressure and in order to avoid global embarrassment, China lifted the “technical hold”, paving the way for UNSC to declare Mohammad Azhar Masood a global terrorist.
The repeated stance of China blocking India’s entry in Nuclear Suppliers Group (NSG) has been another persistent irritant in relations between the two countries. This is despite the fact that India has a proven track record of being a responsible nuclear state and is committed to its use for peaceful purposes. India also adopted “No First Use” policy in 1998 after Pokhran-II tests and in 1999, released the draft of the doctrine that nuclear weapons are solely for deterrence and that India will pursue a policy of “retaliation only”. A policy of discrimination against India’s entry in NSG has been displayed brazenly by China citing reasons which it has not applied to itself for continuing to be part of the same group.
On the other hand, India has displayed an honest commitment towards developing rm and trustworthy relations with its neighbours, except for terror-sponsoring Pakistan. India settled border issues with Bangladesh in 2015 involving 162 enclaves. India ceded 17,161 acres of land to Bangladesh to get 7,110 acres in return. This revealed the magnanimous face of India in developing positive and lasting relations with its smaller neighbours. India settled the Katchatheevu island ownership dispute with Sri Lanka, favouring the latter through an agreement. India still awaits concrete positive moves from China to remove the trust de cit in relations between the two countries. To expect India to join China’s ambitious BRI or be part of CPEC – which runs through Indian claimed territory under Pak administration – neither displays any diplomatic logic nor meets the Indian public’s expectations of laying the foundation of a long and lasting Indo- China friendly relationship.
Courtesy: India-China Chronicle
The author is a former Director General of J&K Police (2007-2012) and Former Chief Vigilance Commissioner J&K (2013-2017). He is the recipient of the Webber Seavey Award for Quality in Law Enforcement (awarded by International Association of Chiefs of Police, Washington, USA), Prime Minister’s Award for Excellence in Public Administration, President’s Police Medal for Distinguished Services, President’s Police Medal for Meritorious Services, Operation Vijay Medal (Kargil operations) and Antrik Suraksha Seva (Internal Security Duty) Medal awarded by the Government of India.