MADISON BUTCHKO writes an Op-Ed on the pros and cons of China’s often-tauted Belt and Road Initiative.
The Belt and Road Initiative (BRI), launched by China in 2013, aims to enhance regional and global trade and stimulate economic growth across Asia and beyond. The BRI is mostly deployed through a network of infrastructure projects. While the BRI promises significant development opportunities, it often imposes unsustainable debt burdens on participating countries. The BRI traps developing nations in a cycle of debt, high loan amounts, and dependency on China, leading to economic vulnerability, limited economic returns, and loss of sovereignty. Initially framed as a developmental boon, the BRI has often resulted in economic and political pitfalls for many countries, highlighting the need for more sustainable and equitable investment practices.
In 2013, President of China Xi Jinping launched the “One Belt, One Road (一帶一路)” project. It became the platform to start thinking about new investment ideas. This new thinking assumed the shape of predatory lending projects initiated by China for developing countries. The trademark of the BRI initiative is lending high-interest loan amounts provided by China, which often exceed the financial capacity of recipient countries. The loans provided under the BRI often come with terms that exacerbate these vulnerabilities, such as high interest rates and short repayment periods, making it difficult for countries to manage their debt effectively. In a study by Bandiera and Tsiropoulos, the authors have noted that debt increased in more than 50 percent of the countries that have received loans under BRI. This finding underscores a critical flaw in the initiative’s design: rather than fostering sustainable economic development, the BRI frequently deepens financial instability in the recipient countries. The BRI is hailed as a development project, but it has not been helpful in generating economic growth; rather, it has counter effects on receiving countries.
Furthermore, according to Hurley, Morris, and Portelance, the Center for Global Development highlighted eight countries at particular risk of debt distress due to BRI loans, including Djibouti, Kyrgyzstan, and Laos. These nations, struggling with high debt-to-GDP ratios, are increasingly vulnerable to financial crises. The increasing debt-to-GDP ratios in many BRI participant countries highlight the economic vulnerability and dependency created by these loans. As these countries struggle to service their debts, they become more susceptible to financial crises and economic instability. This growing vulnerability indicates that the BRI not only fails to deliver promised economic benefits but also exacerbates financial stress in already fragile economies.
Additionally, the high debt levels often force countries to seek additional loans, creating a cycle of debt dependency. Sharma discusses how China’s lending practices under the BRI are often seen as a strategy to create dependency. The loans, given at market or above-market interest rates, require regular refinancing, perpetuates the cycle of debt. This refinancing process saps financial resources that could otherwise be invested in development projects that boost GDP. Since precious financial resources are diverted to service the debt, countries cannot invest in projects that can generate GDP. Thus, the financial structure of BRI loans keeps countries in economic distress and dependent upon foreign loans, undermining their economic sovereignty.
Not only does the BRI have unfair credit lending practices, but its projects are also not generating enough returns to be viable capital investments. Initially, it was claimed that Gwadar deep port in Pakistan would be developed to attract trade and commerce for China and other landlocked countries. However, the project has not yielded the desired return. Wolf notes that Gwadar Port has yet to become the bustling trade hub it was envisioned to be, despite significant investment. The port’s underperformance has strained Pakistan’s economy, which is now grappling with a growing debt burden. Similarly, other BRI projects have failed to deliver the expected economic benefits, making it difficult for countries to generate the revenue needed to repay their loans. This pattern of underperformance reveals a systemic issue with the BRI: many projects are not economically viable, leading to wasted resources and increased debt without the offsetting benefit of economic growth.
The inability to repay BRI loans can lead to a loss of sovereignty over critical national assets. This phenomenon was starkly illustrated by Sri Lanka’s Hambantota Port case, where debt repayment issues resulted in a long-term lease of the port to China. Such arrangements not only undermine the sovereignty of developing countries but also grant China significant control over strategic infrastructure. This loss of control can have far-reaching implications for the political and economic independence of the debtor nations. Abi-Habib details how the transfer of control over Hambantota Port to China has significant geopolitical implications. It not only allows China to expand its influence in a strategically important region but also undermines Sri Lanka’s ability to make independent policy decisions. This shift in control illustrates the broader risks associated with BRI projects, where financial dependency translates into political and strategic concessions. These concessions can weaken a nation’s sovereignty and autonomy, effectively placing critical infrastructure and strategic assets under foreign control.
Proponents of the BRI argue that it offers unparalleled development opportunities for participating countries. They claim that infrastructure projects can spur economic growth and improve connectivity. While this is true in theory, the reality is that the economic benefits are often overshadowed by the financial burdens imposed by the loans. Moreover, any growth stimulated by these projects is frequently insufficient to offset the debt incurred. Brautigam argues that the narrative of “debt-trap diplomacy” is often exaggerated. She contends that many BRI projects do have the potential to drive economic growth and that the issues of debt distress are not unique to Chinese loans but are a broader problem in global financing. However, even Brautigam acknowledges that the terms of Chinese loans can exacerbate financial vulnerabilities, highlighting the need for more sustainable lending practices. Thus, while there may be some merit to the argument that BRI projects can foster development, the current lending practices and financial terms often negate these potential benefits.
While the BRI’s development potential is significant, its implementation has often led to economic distress and increased dependency for many developing nations. The initiative’s structure, which involves substantial loans with stringent terms, creates a financial environment where recipient countries struggle to repay their debts, leading to economic instability and a loss of sovereignty. The need for more sustainable financing models is crucial to ensure that infrastructure development does not compromise the financial and political independence of participating nations. By addressing these issues, the international community can help foster genuine development that benefits all parties involved.
While the Belt and Road Initiative offers potential development benefits, it often traps developing countries in a cycle of debt and dependency. The high loan amounts, economic vulnerability, limited economic returns, and loss of sovereignty associated with BRI projects highlight the risks involved. To avoid these pitfalls, developing countries must seek more sustainable financing models and diversify their funding sources to reduce dependency on any single creditor. International financial institutions should enforce fair lending standards and ensure projects are beneficial for local economies. Rigorous assessments of project feasibility and strategic value, coupled with capacity building in recipient countries, are essential. By fostering transparency, equitable terms, and a collaborative approach, the promise of infrastructure development can be realized without compromising the financial and political independence of participating nations.
Madison Butchko is a senior at Yale University pursuing a B.S. in Physics and a B.A. in East Asian Studies with a concentration on China. Her research spans topics from Asian American representation in media to examining China’s social issues within its cultural and historical contexts. Originally adopted from China, her personal connection to the country sparked her academic interest, which deepened after briefly serving in the Air Force, where she became intrigued by the geopolitical landscape. Fluent in Chinese and currently learning Japanese, she continues to explore international relations and cultural dynamics in East Asia.
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