“When the Tide Goes Out”
China is likely to remain its own worst enemy. Its competitors are waking up but face coordination challenges. In 2018, the U.S. Congress passed the BUILD Act, which consolidates development-finance activities into a new agency, the U.S. International Development Finance Corporation (USDFC), with twice the resources and expanded authorities. The same year, the European Union announced its “EU-China Connectivity Platform.”31 Australia, India, and Japan have been active as well, and several bilateral and multilateral cooperation agreements have been signed. But even if these comparatively modest efforts are made into something greater than the sum of their parts, particularly for mobilizing private investment, the sheer demand for infrastructure globally guarantees that China will have ample opportunities.
Meanwhile, China is repeating the mistakes, and learning the lessons, of powers that came before it, especially the costs of going it alone. Xi’s emphasis on multilateralism at the second forum could be strongly self-interested, just it was for Western powers to create multilateral development banks. Since the BRI has been mostly a cover for bilateral deal making, China bears the financial and reputational costs when things go wrong. Pulling in more partners would allow China to share the risks of hugely complex projects in risky business environments, but it is unclear how much China is willing to relinquish for those benefits.
China’s interest in large projects beyond its borders will not end with Xi. Just as the “going out” policy preceded the BRI, someone could fashion yet another tagline to make Chinese power, projected through infrastructure and investment, appear more palatable. Like the great powers that have come before it, as long as China’s rise continues, its companies will seek more market opportunities, and its leaders will crave the access and influence that large projects provide. These projects also take years to complete and decades to repay. If the BRI was magically paused and no more projects were announced, its current footprint would still take years to unfold.
Ultimately, China’s economy will determine how long the BRI continues and in what form. China’s foreign reserves have dropped substantially since the BRI was launched, and it faces rising costs and shrinking revenues at home. Even before the coronavirus pandemic, there were indications of a pullback on BRI-related projects, suggesting that project announcements could be slimmed down in the coming years. That is bad news for China’s massive state-owned firms, but scarcity may also make oversight easier and encourage Beijing to increase the quality of its projects.
These headwinds may also lift China’s “digital silk road.” Compared to ports, railways, and other megaprojects, digital infrastructure is often less risky financially while offering distinct strategic benefits. Even in friendly Pakistan, it is much easier for China to lay a fiber-optic line than a pipeline across difficult terrain. Building and operating telecommunications networks offers commercial gains, intelligence, and the ability to disrupt enemy communications while protecting your own. Facing increased scrutiny in Western markets, China’s tech champions may double down in developing and emerging markets.
Ironically, if the BRI is updated to genuinely reflect Xi’s buzzwords and address his critics—adopting high standards in its projects, emphasizing multilateral deals, and so on—Western policy makers might eventually regret that Chinese officials took their advice.32 A more focused, higher-quality BRI could turn China from a lender of last resort to a preferred partner. It could spread Chinese influence in more targeted areas, from setting technology standards to swaying foreign capitals. It could signal that China is succeeding where others have failed. Because of what that implies about China’s ability to wield power, nothing would be more alarming than success.
In the coming years, it is even more likely that China’s mistakes will shake the world. Its partners are counting on sustaining high growth to pay their debts, setting ambitious targets that leave little room for error or unexpected events. Early mistakes along the BRI occurred in a relatively forgiving global economy, and as Warren Buffet is fond of saying, “you only find out who is swimming naked when the tide goes out.”33 The risks are probably greater than Chinese officials appreciate. Most infrastructure booms have gone bust.
The coronavirus pandemic is laying bare the BRI’s flaws, even as it creates new needs that China could exploit. Developing and emerging economies that borrowed heavily are being pushed beyond the brink. The same instinct for secrecy that hides the terms of China’s deals along the BRI concealed the outbreak. Most troubling for Xi’s vision, China shared the virus with the world through the very connections the BRI aims to strengthen. It lost control.
Without a doubt, putting forward a decades-long vision for global connectivity takes courage. On the world stage, nothing approaches the BRI’s scale and ambition. But avoiding failure will require much greater skill, lower expectations, and a heavy dose of modesty. Otherwise, China’s boldness will eventually look like hubris. The difference between the two will be determined not in grand halls but on the ground.
Notes
Chapter One. Project of the Century
1. Evan A. Feigenbaum, “Why China’s Highly Strategic Brand of Revisionism Is More Challenging than Washington Thinks,” MacroPolo, April 27, 2018, https://carnegieendowment.org/2018/04/27/reluctant-stakeholder-why-china-s-highly-strategic-brand-of-revisionism-is-more-challenging-than-washington-thinks-pub-76213.
2. “List of Countries That Have Signed a ‘One Belt, One Road’ Cooperation Document with China” (in Chinese), Belt and Road Portal, April 30, 2019, https://www.yidaiyilu.gov.cn/gbjg/gbgk/77073.htm.
3. Xinhua, “President Xi Eyes Bigger Role for California in China-U.S. Cooperation,” Xinhuanet, June 6, 2017, http://www.xinhuanet.com//english/2017-06/06/c_136344690.htm.
4. Ana Swanson, “How China Used More Cement in 3 Years than the U.S. Did in the Entire 20th Century,” Washington Post, March 24, 2015, https://www.washingtonpost.com/news/wonk/wp/2015/03/24/how-china-used-more-cement-in-3-years-than-the-u-s-did-in-the-entire-20th-century/?utm_term=.532ea924778f.
5. “ENR 2018 Top 250 Global Contractors 1–100,” Engineering News Rec-ord, August 2018, https://www.enr.com/toplists/2018-Top-250-Global-Contractors-1.
6. Xinhua, “Belgrade Joins Belt and Road Marathon Series,” Xinhuanet, April 21, 2018, http://www.xinhuanet.com/english/2018-04/21/c_137125888.htm.
7. The unreliability of Chinese data extends well beyond lending, as James Palmer argues in a sharp essay: “Nobody Knows Anything about China,” Foreign Policy, March 21, 2018, https://foreignpolicy.com/2018/03/21/nobody-knows-anything-about-china/.
8. Xinhua, “Xinhua Commentary: Belt and Road for Joint Development Benefits,” Xinhuanet, April 25, 2019, http://www.xinhuanet.com/english/2019-04/25/c_138009104.htm.
9. Jonathan Hillman, “Five Myths about China’s Belt and Road Initiative,” Washington Post, May 31, 2019, https://www.washingtonpost.com/outlook/five-myths/five-myths-about-chinas-belt-and-road-initiative/2019/05/30/d6870958-8223-11e9-bce7-40b4105f7ca0_story.html?utm_term=.4d8d4f2cf86d.
10. Asian Development Bank, “Asia Infrastructure Needs Exceed $1.7 Trillion per Year, Double Previous Estimates,” February 28, 2017, https://www.adb.org/news/asia-infrastructure-needs-exceed-17-trillion-year-double-previous-estimates.
11. UNDP China, “UNDP Engagement with the Belt and Road Initiative,” YouTube, May 12, 2017, https://www.youtube.com/watch?v=b6rWKn0g7lg.
12. Herbert Smith Freehills, “Belt and Road, Paving the Way to Global Trade: Our Team,” https://www.herbertsmithfreehills.com/latest-thinking/hubs/belt-and-road.
13. HSBC, “What do you think of when you hear the term Belt and Road,” Twitter, May 16, 2019, 6:33 a.m., https://twitter.com/HSBC/status/1129017032488493056.
14. Patrick Shanahan, “Written Statement for the Record” (testimony presented to the U.S. Senate Armed Services Committee, Washington, DC, March 14, 2019), https://www.armed-services.senate.gov/imo/media/doc/Shanahan_03-14-19.pdf.
15. Pet
er Wells and Don Weinland, “Fitch Warns on Expected Returns from One Belt, One Road,” Financial Times, January 25, 2017, https://www.ft.com/content/c67b0c05-8f3f-3ba5-8219-e957a90646d1.
16. For insight into China’s political and economic underpinnings, see Regina Abrami, William Kirby, and F. Warren McFarlan, Can China Lead? Reaching the Limits of Power and Growth (Boston: Harvard Business Review Press, 2014); Jude Blanchette, China’s New Red Guards: The Return of Radicalism and the Rebirth of Mao Zedong (Oxford: Oxford University Press, 2019); Elizabeth Economy, The Third Revolution: Xi Jinping and the New Chinese State (Oxford: Oxford University Press, 2018); David M. Lampton, Following the Leader: Ruling China, from Deng Xiaoping to Xi Jinping (Berkeley: University of California Press, 2014); George Magnus, Red Flags: Why Xi’s China Is in Jeopardy (New Haven, CT: Yale University Press, 2018); Dinny McMahon, China’s Great Wall of Debt: Shadow Banks, Ghost Cities, Massive Loans, and the End of the Chinese Miracle (Boston: Houghton Mifflin Harcourt, 2018); Andrew Nathan, “China’s Changing of the Guard: Authoritarian Resilience” and “A Factionalism Model for CCP Politics,” in Critical Readings on the Communist Party of China (Leiden: Brill, 2017), 86–99, 849–886; David Shambaugh, China’s Future (New York: Wiley, 2016).
17. For higher-level views, see Robert Kaplan, The Return of Marco Polo’s World (New York: Random House, 2018); Nadège Rolland, China’s Eurasian Century? Political and Strategic Implications of the Belt and Road Initiative (Seattle: National Bureau of Asian Research, 2017); Peter Frankopan, The New Silk Roads: The Present and Future of the World (New York: Knopf, 2019); Richard McGregor, Asia’s Reckoning: China, Japan, the Fate of U.S. Power in the Pacific Century (New York: Penguin Books, 2018). Notable exceptions are Bruno Maçães, The Dawn of Eurasia: On the Trail of the New World Order (London: Penguin, 2018); Tom Miller, China’s Asian Dream: Empire Building along the New Silk Road (London: Zed Books, 2017); Wade Shepard, On the New Silk Road: Journeying through China’s Artery of Power (London: Zed Books, 2019). Several scholars have helpfully examined China’s activities in more narrow geographies, and those are referenced in the chapters that follow. Journalists have provided some of the best on-the-ground coverage.
18. Derek Scissors, “China Global Investment Tracker,” American Enterprise Institute and the Heritage Foundation, accessed February 2, 2020, https://www.aei.org/china-global-investment-tracker/.
19. Jonathan Hillman, “Influence and Infrastructure,” Center for Strategic and International Studies, January 22, 2019, https://www.csis.org/analysis/influence-and-infrastructure-strategic-stakes-foreign-projects.
20. Bent Flyvbjerg, “Introduction: The Iron Law of Megaproject Management,” in The Oxford Handbook of Megaproject Management, ed. Bent Flyv-bjerg (Oxford: Oxford University Press, 2017), 1–18, https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2742088; Atif Ansar, Bent Flyvbjerg, Alexander Budzier, and Daniel Lunn, “Does Infrastructure Investment Lead to Economic Growth or Economic Fragility? Evidence from China,” Oxford Review of Economic Policy 32, no. 3 (2016): 360–390, https://arxiv.org/ftp/arxiv/papers/1609/1609.00415.pdf.
21. Ye Chen, Hongbin Li, and Li-An Zhou, “Relative Performance and the Turnover of Provincial Leaders in China,” Economic Letters 88, no. 3 (September 2005): 421–425, https://core.ac.uk/download/pdf/6271011.pdf.
22. Veasna Kong, Steven G. Cochrane, Brendan Meighan, and Matthew Walsh, “The Belt and Road Initiative—Six Years On,” Moody’s Analytics (Sydney), June 2019, https://www.moodysanalytics.com/-/media/article/2019/Belt-and-Road-Initiative.pdf.
23. H. J. Mackinder, “The Geographical Pivot of History,” Geographical Journal 23, no. 4 (April 1904): 434, https://www.jstor.org/stable/1775498?seq=1#page_scan_tab_contents.
24. Qiu Qianlin, “Trade Grows with Better Links,” China Daily, April 28, 2019, http://www.chinadaily.com.cn/a/201904/28/WS5cc504f6a3104842260b8d58.html.
25. Zbignew Brzezinski, The Grand Chessboard, vol. 1 (New York: Basic Books, 1997), xiv.
26. Deborah Brautigam, The Dragon’s Gift: The Real Story of China in Africa (Oxford: Oxford University Press, 2009), 296.
27. Jonathan Hillman, “A Chinese World Order,” Washington Post, July 23, 2018, https://www.washingtonpost.com/news/theworldpost/wp/2018/07/23/china-world-order/?utm_term=.d780fdcbdafb.
28. European Commission, Joint Communication to the European Parliament, the European Council and the Council: EU-China—A Strategic Outlook (Strasbourg: European Commission, March 2019), 5, https://ec.europa.eu/commission/sites/beta-political/files/communication-eu-china-a-strategic-outlook.pdf.
29. Mackinder, “Geographical Pivot of History,” 423.
30. For an excellent overview of Mahan’s thinking and its relevance for today, see Michael J. Green, By More than Providence: Grand Strategy and American Power in the Asia Pacific since 1783 (New York: Columbia University Press, 2017), 79–93. For commentary on Mackinder, Mahan, and the BRI, see Joseph S. Nye, “Xi Jinping’s Marco Polo Strategy,” Project Syndicate, June 12, 2017, https://www.project-syndicate.org/commentary/china-belt-and-road-grand-strategy-by-joseph-s-nye-2017-06?barrier=accesspaylog.
31. Alfred Thayer Mahan, The Influence of Sea Power upon History, 1660–1783 (Boston: Little, Brown, 1890), 398.
32. China Power Project, “Is China the World’s Top Trader?,” Center for Strategic and International Studies, March 28, 2019, https://chinapower.csis.org/trade-partner/; Richard Scott, “China-Owned Fleet Becomes World’s Second Largest,” Hellenic Shipping News, September 13, 2018, https://www.hellenicshippingnews.com/china-owned-fleet-becomes-worlds-second-largest/.
33. Anna Coren, Ellana Lee, Jane Sit, and James Griffiths, “Malaysian PM Mahathir: ‘Most of the Top Echelons in the Government Are Corrupt,’ ” CNN, July 26, 2018, https://www.cnn.com/2018/07/25/asia/malaysia-mahathir-mohamad-interview-intl/index.html.
34. Mike Pence, “Remarks by Vice President Pence on the Administration’s Policy toward China” (Hudson Institute, Washington, DC), White House, October 4, 2018, https://www.whitehouse.gov/briefings-statements/remarks-vice-president-pence-administrations-policy-toward-china/.
35. Daniel Headrick, “A Double-Edged Sword: Communications and Imperial Control in British India,” Historical Social Research / Historische Sozialforschung 35, no. 1 (2010): 52.
36. Andrew Small, “A Slimmer Belt and Road Is Even Scarier,” Bloomberg Opinion, April 24, 2019, https://www.bloomberg.com/opinion/articles/2019-04-24/a-slimmed-down-belt-and-road-will-increase-china-s-influence.
Chapter Two. Imperial Echoes: Technology and the Struggle for Control
1. I am indebted to Daniel R. Headrick for his comments on this chapter and for his contributions, which inspired many of its historical connections, especially The Tools of Empire: Technology and European Imperialism in the Nineteenth Century (New York: Oxford University Press, 1981); The Tentacles of Progress: Technology Transfer in the Age of Imperialism, 1850–1940 (Oxford: Oxford University Press, 1988); The Invisible Weapon: Telecommunications and International Politics, 1851–1945 (Oxford: Oxford University Press, 1991).
2. Jonathan Hillman, “Influence and Infrastructure,” Center for Strategic and International Studies, January 22, 2019, https://www.csis.org/analysis/influence-and-infrastructure-strategic-stakes-foreign-projects.
3. The project was later renamed the “Pakistan East Africa Connecting Europe” cable, keeping the acronym the same.
4. “Report: Kenya Risks Losing Port of Mombasa to China,” Maritime Executive, December 20, 2018, https://www.maritime-executive.com/article/kenya-risks-losing-port-of-mombasa-to-china.
5. Jonathan Hillman, “The Hazards of China’s Global Ambitions,” Washington Post, February 5, 2018, https://www.washingtonpost.com/news/theworldpost/wp/2018/02/05/obor-china-asia/?utm_term=.0125830d87f3.
6. Headrick, Tools of Empire.
7. Irène Delage, “Inauguration Ceremony of the Suez Canal at Port-Said, 17 November, 1869,” Fondation Napoléon, accessed November 15, 2018, https://www.napoleon.org/en/history-of-
the-two-empires/paintings/inauguration-ceremony-of-the-suez-canal-at-port-said-17-november-1869/.
8. Fondation Napoléon, “Speech Given by Monsignor Bauer,” November 16, 1869, https://www.napoleon.org/wp-content/themes/napoleon/annexes/hors-serie/suez/en/html-content/inauguration/ceremonie/discours.html.
9. Max E. Fletcher, “The Suez Canal and World Shipping, 1869–1914,” Journal of Economic History 18, no. 4 (1958): 572.
10. Jean-Paul Calon, “The Suez Canal Re-visited: 19th Century Global Infrastructure,” in Macro-Engineering: MIT Brunel Lectures on Global Infrastructure, ed. Frank P. Davidson, Ernst G. Frankel, and C. Lawrence Meador (Cambridge, UK: Woodhead, 1997), 11–24, https://www.sciencedirect.com/science/article/pii/B9781898563334500057.
11. “The Suez Ship Canal,” New York Times, September 3, 1869, https://nyti.ms/2yJgXqG.
12. Zachary Karabell, Parting the Desert: The Creation of the Suez Canal (New York: Knopf, 2003).
13. Amal Soliman ElGhouty, “Public Debt and Economic Growth in Egypt,” Business and Economic Research 8, no. 3 (2018): 183–200, http://www.macrothink.org/journal/index.php/ber/article/view/13443.
14. “Ismail Pasha,” Encyclopedia.com, accessed February 4, 2020, https://www.encyclopedia.com/people/history/egyptian-history-biographies/khedive-egypt-ismail.
15. Caroline Piquet, “The Suez Company’s Concession in Egypt, 1854–1956: Modern Infrastructure and Local Economic Development,” Enterprise and Society 5, no. 1 (2004): 107–127, https://muse.jhu.edu/article/53850.
16. Isma’il would later agree to pay 130 million francs, roughly half of the company’s capital, to revise these provisions. Olukoya Ogen, “The Economic Lifeline of British Global Empire: A Reconsideration of the Historical Dynamics of the Suez Canal, 1869–1956,” Journal of International Social Research 1, no. 5 (Fall 2008): 527, http://www.sosyalarastirmalar.com/cilt1/sayi5/sayi5pdf/ogen_olukoya.pdf.
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