The Belt and Road Initiative (BRI) launched by China in 2013 involves 4.8 billion population in 65 countries, accounting for 44% of the global population, and contributes 40% of the world's real GDP growth. It has been more than five years since the launch of the BRI, and China has invested huge resources to promote this strategic initiative. According to the estimations by some Western research institutions, the railway, highway and port construction plans in the BRI will bring economic prosperity to the participating countries; the value of the entire plan is thought to be as high as US$1.4 trillion.
Looking from the history of the stages of China's economic development, the BRI is in line with historical logic, that after China develops to a certain extent, it needs to export comparative advantages, excess capacity, technology, and capital; all these are China’s contribution to the international community in the context of globalization. Although this is with good intention, China has also invested heavily in the BRI, this has triggered many negative comments and even accusations in the international arena.
Observing the criticisms of the international community, an important issue is that China's investment has brought debt problems to BRI’s participating countries. This view holds that China's large-scale infrastructure construction projects launched in the BRI have exceeded the needs of the host country. Due to the huge investment in the projects, they often bring heavy debt burdens to the country where the investment is made. Some Western countries even claim that China has created "debt traps" for some backward countries. Such criticism is neither fair nor impartial, but it does reflect certain problems on the BRI projects.
Recently, the new Maldivian finance minister, Ibrahim Ameer, said that the country will ask Beijing to reduce its accumulated debt during the Chinese investment boom in recent years, and claimed that large-scale corruption during the last government administration had exaggerated the value of the contract. “This was willful corruption” Ibrahim Ameer told the Financial Times. “The former government knew what they were doing, getting kickbacks from contractors . . . That’s why the contract prices were too high.” During the period of former President Abdulla Yameen, Chinese-owned projects in the Maldives surged. Although the alleged corruption was not limited to projects supported by China, Ameer said that Chinese-funded projects accounted for most of the problematic ones. Ameer pointed out that Malé planned to ask Beijing to reduce the outstanding debt in light of the allegedly inflated contracts, as well as adjusting the interest rates and repayment schedules. Malé’s new position will add to the worries of China in its BRI momentum.
It is not only the Maldives that proposes to reduce debts to China. Not long ago, Malaysia stopped three oil pipelines backed by the Chinese government and is now renegotiating a US$ 20 billion railway project. In Pakistan, the government is trying to renegotiate the agreement reached by the previous government under the BRI framework. Myanmar also expressed that it has no plans to resume the construction of hydropower dams supported by China. China stated that it had provided loans below the market rate for the Maldives project “in accordance with Malé's wishes and development needs”. An official of the Chinese Ministry of Foreign Affairs said, "in the process of discussing and determining relevant cooperation programs, China and Maldives have fully considered factors such as debt sustainability."
Anbound’s researchers believe that the issues of these projects seem to be centered on the projects’ return on investment and debts. On a more macro level, China should pay attention to the problems reflected by the debt-free needs of these countries. In the future, China will not be able to use the "state-owned enterprises + large infrastructure" approach in its BRI. From the problems China has encountered in the Maldives, Sri Lanka, and even in Pakistan, the overly huge projects, high debts, and investment methods have alienated the local ordinary people, which in turn cause problems in the financial and social sustainability of the BRI.
It is therefore necessary to promote the BRI centering on the common market.
How then, should China build a common market? As a proponent of the strategic concept of the common market, Anbound has conducted multiple analyses and discussions, as well as policy recommendations. Anbound’s Chief Researcher Chan Kung once pointed out that the core is that the government should do what the government should do, such as engaging in diplomacy to pave the way for the market economy, and not over-manipulating the projects. The Chinese government does need to build some "infrastructure constructions" on its institution system, instead of just focus on the road, bridge construction. Chan Kung believes that the prosperity of the market depends on the diversity of businesses; it would require the large-scale entry of private enterprises, which is true in other countries. Therefore, the construction of the common market can solve the problem of the development space of Chinese private enterprises, which is equivalent to the emergence of a new big market. If a prosperous common market is built, the economies of the BRI participating countries will take off, which will in turn guarantee the infrastructure projects in the future.
The construction and development of the common market is a strategic proposal that is friendly and convincing in international geopolitics. Its characteristics of cooperation, diversity, inclusiveness and its proximity to the market are very different from the model of “state-owned enterprises + large infrastructure”. If the common market can be promoted with the basis of the framework agreement, it will have a win-win effect for China and the countries where it is invested, and truly realize the cooperative interests spread across the grassroots of different countries and reduce the interference of corruption and political disputes.
The common market can be oriented to different countries and regions; it can be established in Central Asian and South Asian countries. Anbound’s scholars have previously suggested that China and India can seek closer cooperation, focusing on the global market to consider multilateral cooperation in the Himalayan region, thereby promoting the establishment of the Himalayan Common Market, and push for bilateral geographic strategic cooperation to a new high. If China and India, as two geographically proximate countries with huge populations can lead the construction of the Himalayan Common Market, this will have an impact on the entire South Asian region and provide development opportunities.
Final analysis conclusion:
The implementation model of the BRI needs to be adjusted. The project model based on “state-owned enterprises + large infrastructure” approach should give way to a development model centered on the common market.
