6. Conclusion and Policy Recommendations
Mainstream accounts depict China’s BRI as a predatory form of economic statecraft, seeking to ensnare poor countries for geopolitical ends. This paper has demonstrated that the BRI is, in fact, motivated largely by economic factors. It has also shown that China’s fragmented and poorly coordinated international development financing system is not geared towards advancing coherent geopolitical aims. In addition, recipient countries (such as Sri Lanka and Malaysia) are not hapless victims, but actively shape outcomes within China’s development financing system. Accordingly, the BRI does not follow a top-down plan, but emerges piecemeal, through diverse bilateral interactions, with outcomes being shaped by interests, agendas and governance problems on both sides. What does this imply for policymakers and civil society actors interested in the BRI?
Chinese policymakers should improve project governance and SOE regulation
China’s loosely coordinated and weakly regulated development financing system often yields poor results at high cost, generating blowback against China, as the Sri Lankan and Malaysian cases show. Chinese policymakers increasingly recognize this and have tried to improve governance arrangements and cultivate stronger relations with non-government groups in partner countries (Rolland, 2019; Zou and Jones, 2019). However, they must go further. Rather than a multi-agency bargaining system, a coherent, integrated decision-making process is required, backed with sufficient risk assessment capacities and operating according to strict, clear and enforceable rules, rather than vague guidelines. This will involve tackling vested interests within China, particularly among commercially oriented agencies and in the SOE sector.
Recipient-state policymakers should improve their capacity to evaluate, negotiate and regulate BRI projects
Recipient governments cannot expect China to carry out due diligence on their behalf. Since Chinese development financing is recipient-led, these governments must take greater responsibility for ensuring that projects are viable and financially sustainable. They must also bargain harder and more judiciously with Chinese partners, who are primarily driven to make profits, and must take the lead in ensuring developmental benefits for local people. In addition, tendering should be open to minimize corruption. Since Chinese regulations continue to rely on host-country governance, recipients must bolster their domestic regulations, and their inspection and enforcement capacities, to ensure that projects do not inflict social and environmental harms. International donors can support the changes through capacity-building projects, but this is ultimately a political, not technical, task, given the powerful domestic interests at stake in many countries.
Policymakers in other states: Adopt a more realistic understanding of, and appropriate responses to, the BRI
Do not respond to the BRI as a geopolitical strategy
If policymakers in other countries continue to assume that the fragmented activities comprising the BRI are directed from the top down as part of a coordinated grand strategy, they will formulate unnecessarily hostile and counterproductive responses. A geostrategic reading of the BRI entails balancing strategies like the ‘free and open Indo-Pacific’, seeking to curb a Chinese ‘offensive’ that the BRI does not really constitute. This is seen by Beijing as evidence of relentless Western hostility, fuelling a conflict spiral and increasing the risk of great-power confrontation. It also alienates developing countries keen to develop their infrastructure but receiving no Western assistance.
Provide alternative development financing
Rather than attacking the BRI, wealthy countries should provide better alternatives. Traditional donors’ abandonment of infrastructure development in favour of dubious ‘good governance’ programmes created the space for China’s unique offer to developing countries. Clearly, China offers what many traditional donors should not: the debt-financed implementation of sometimes apparently senseless projects, often coupled with kickbacks. Nonetheless, China also offers a less risk-averse, materialist approach to development, with tangible benefits. Other states should follow suit and could even partner with China on specific projects to strengthen governance standards – as seen with the establishment of the AIIB (Hameiri and Jones, 2018).
In a positive development, traditional donors have begun returning to infrastructure financing. In 2018, the US agreed with Australia and Japan to co-finance Asia-Pacific infrastructure, and in December 2019 the US established the International Development Finance Corporation (DFC), as the main focal point for its international infrastructure financing. In 2019, the EU and Japan agreed to finance Europe–Asia connectivity, and Australia launched its Infrastructure Financing Facility for the Pacific. However, these initiatives need additional funding to truly compete with the BRI. Competition is in some cases appropriate, for example, where Chinese-financed projects are of poor quality or are socially and environmentally harmful. Elsewhere, it may be more appropriate to partner with China. As the BRI is so fragmented, there is no one-size-fits-all approach. Other finance providers must tailor their actions to the particular context of recipient states and the nature of Chinese engagements there.
Engage recipients and China to improve BRI governance
Donors should support recipient countries to strengthen their development governance systems, and engage China in dialogue to bring Chinese development financing closer to international standards. The AIIB could represent a potential entry point. Although a marginal player within China’s development financing system, it is the only platform where Chinese and other donor states’ officials interact regularly.
Help improve the transparency of megaprojects
Vested interests will resist governance improvements where they benefit from existing arrangements. Donors should therefore support transparency initiatives, including whistleblowing, investigative journalism and civil society campaigning, to shed light on projects, as well as academic research like the AidData project, which painstakingly pieces together open-source data. Transparency alone will not transform governance, but it will provide opposition groups with the requisite ammunition to pursue greater accountability and policymaking in the public interest.
Civil society and political opposition: Recalibrate campaigning
Chinese and recipient governments alike are not neutral actors, disinterestedly pursuing ‘win-win co-operation’ and broad-based development. As this paper shows, they are often serving powerful political and business interests seeking to exploit the BRI for gain. Civil society and political opposition groups therefore have crucial roles to play. Like states, these groups need to avoid a conspiratorial view of the BRI or blaming ‘China’ exclusively for problems. The BRI is not a well-crafted Chinese plan, and recipient governments are equally or even more to blame for poorly conceived development projects. Externalizing blame only allows domestic elites to evade accountability. It can also border on racist nationalism. Civil society and opposition groups would be better advised to demand a transparent and participatory approach to project design and management. They should also exploit the Chinese party-state’s fragmentation to seek multiple entry-points for lobbying campaigns. Viewed as a monolithic entity pursuing a unilateral strategy, China appears impervious to pressure. But, in reality, as Inclusive Development International’s (2019) comprehensive handbook shows, there are many pressure points, including diverse regulatory agencies, some of which are genuinely interested in preventing malfeasance, upstream financiers, and downstream users of products and services arising from Chinese projects.