Chairman's thoughts
Belt and Road Initiative
a complementary perspective

Publicerad 2019-10-07

There is so much talk about the Belt and Road Initiative (BRI). Sometimes bordering to hyperbole. And it is almost always stressing  the commercial benefits and the business opportunities BRI offers to the world. Sweden-China Trade Council’s Chairman and Senior Adviser of Mannheimer Swartling, Thomas Lagerqvist shares his thoughts on the complexity of the project with readers of KinaNytt.

BY THOMAS LAGERQVIST, thomas.lagerqvist@sctc.se

I would like to introduce a complementary perspective. The BRI is not just a commercial project. I believe that it is important to keep that in mind when we assess it and when we discuss it.

First of all, we need to understand that the BRI is enshrined in the Chinese Constitution. On October 18, 2017  Xi Jinping made BRI a focal point in his report to the 19th National People’s Congress.  From then onwards it has become an important part of the Xi Jinping Thought of Socialism with Chinese Characteristics for a New Era, which will, according to the Chinese Constitution of 2018, together with the guidance of Marxism-Leninism, Mao Zedong Thought, Deng Xiaoping Theory, the important thought of Three Represents, the Scientific Outlook on Development help ”realise the great rejuvenation for the Chinese nation”. 

Hence it stands above every criticism. Consequently, any setbacks will be down-played and every success will be magnified.

The approach of of the great rejuvenation of the Chinese people

Second, with the elimination of presidential term limits, Xi can think and plan on the very long time scale upon which success and failure are in this case to be measured. China is approaching the realisation of the great rejuvenation of the Chinese people and it has the capacity and confidence to reach its goal to a degree that is unprecedented. The buzzword is The New Era.

Third, the BRI is China’s plan to build a new world order replacing the US-led international system. Not least against the current backdrop of Donald Trump’s presidency. And therefore, the map of the BRI is already in its fundamental straits the map of the world to come – as China imagines it.

The US disappears, having been moved from the obverse to the reverse. Japan, Korea, Australia and parts of Western Europe may want to preserve a privileged relationship with America, but China hopes that it will have enough leverage over them to ensure that those ties are weakened.

As for South East Asia, the Middle East and  parts of Central and Eastern Europe (e.g. Greece and the Czech Republic), China’s gravitational pull is so massive that those parts of the world will have no choice. I recently attended a meeting together with Nader Mousavizadeh, of Macro Advisory Partners, who reminded us of a meeting he had had with the Singaporean government some ten years ago and where he was told ”please do not ask us to choose between the US and China, because in fact we do not have a choice.”

This map tells a simple story of power and influence. BRI is more than a project or an in initiative.

Fourth, this map tells a simple story of power and influence. It is more than a project or an initiative. The BRI is a movement, representing the slow but inevitable expansion of Chinese influence. Wherever it finds a vacuum or an area of little resistance, it moves in. Where it finds opposition, it stops – if only momentarily.

“The project of the century”

BRI is so formless and multidimensional that in effect it is an operating system, not a program or an application. – so the question whether or not China will succeed in itself makes no sense, unless we think in less binary terms. We have to stop assessing success using traditional ROI thinking and realise that there is so much riding on this that it will not fail. Remember that at the first BRI summit in 2017 Xi Jinping hailed it as as the ”project of the century”. If all goes according to plan, the BRI will change the shape of the world economy  and world politics.

And after all, how shall one measure success? One way to do it is to create a list with all the – properly weighed – goals of the BRI. One can discuss whether 70 or 60 or perhaps 50 percent of them will be realized, but to use a single measure of success is as misleading as it is impossible to conceptualise.

But there are still those who apply a critical view on BRI. Among the most common and plausible criticisms of the initiative is that the very logic behind the BRI encourages decisions-makers and companies to take undue risks, moving too fast and neglecting concerns of the sustainability of investments whose final justification is after all – strategic.

China needs to show that the BRI can succeed

Impatience might turn out to be the initiative’s worst enemy. China needs to show that the BRI can succeed. We know from bargaining theory that the most impatient player will tend to lose out, and China has multiple, endless negotiating processes ahead. However, experience has showed us that China plays in the major league when it comes to negotiation; they tend to play the long game whenever time is not a crucial factor.

Therefore, it is likely that the current pressure on State-Owned Enterprises (SOEs) to accept investments or strike deals that make political but not business sense – will be reinforced by the Belt and Road with Xi Jinping calling the SOEs its ”essential forces”.

Financing risks

Also, in terms of financing Beijing might find itself in a bind. If it takes on the bulk of the financing costs for the BRI there is likelihood that risks to its financial system go into the red. On the other hand if it attempts to push those risks onto participant countries, it will ensure that investments become political issues, poisoning relations between China and other countries. We have already seen this happening. Debt is one concern, but other criticisms have been voiced.

Bruno Macaes author of ”BELT AND ROAD – a Chinese World Order” (published 2018), who inspired to this summary, highlights a number of different scenarios for China’s place in the world system. I will touch upon three of them.

SCENARIO #1 CO-EXISTENCE BY NOT DISLODGING USA FROM THE CENTER 

China would become a prosperous and successful economy, at the same time converging to a Western political and social model. Just like West Germany and Japan it would not attempt to dislodge American power from the center of the world system, hopefully out of a belief that without that cornerstone the system itself cannot survive. Instead, by creating a parallel structure of institutions China is not setting out to destroy the Western-led order.

Its initiatives in the realms of finance, currency, infrastructure, trade and security – most of them now subsumed under the BRI – are meant to provide China with alternatives, to ensure self-reliance in almost every aspect, without thereby reducing its support for the current order.

The West should support such efforts and in that process force China to agree to a specific set of governance rules, which must make its behaviour far more predictable than it is in the context of bilateral agreements. All such institutions will deepen China’s integration into the global economy, possibly reducing the risk for conflict.

SCENARIO #2 CONVERGENCE WITH A CRITICAL DIFFERENCE

This scenario is also one of convergence, but it introduces a critical difference. Although committed to the general principles of the liberal world system, and while converging to some variety of Western politics, China would strive to and perhaps even succeed in replacing the US as the center of the political and economic power.

This is certainly a scenario that seems to share some of the organising principles of the global order as it exists at present – connectivity, openness and interdependence – while advancing Chinese economic and political interests.

In this scenario BRI would play a critical role. Greater leverage allowing it to exert pressure on the US so that the existing international system could be reformed in a way that allowed China to have a degree of influence commensurate with its economic clout.

SCENARIO #3 NO CONVERGENCE BUT NORMATIVE CLASH BETWEEN THE TWO VISIONS OF WORLD ORDER

The third scenario poses the possibility of a normative clash between the two visions of the world order.

The starting point is that China is not converging with a Western political model. Nothing we currently hear and read about from Beijing allows us to think otherwise.

The image of the global order promoted by the BRI differs in dramatic ways from the image of a liberal global order as it exists today and therefore its success will not only mean that a different actor will move to the centre of global power but also that the system itself will be differently organised and the values it embodies will form a new constellation.

One example of this, cited in Macaes book, is that in June 2018 Yao Yunzhu, retired Chinese military, said that the international order needed to be rewritten after failing to heed China’s growth. She cited South China Sea as an example where the rules needed to be rewritten in response to territorial disputes and criticism that China had been constructing islands and militarising them with runways and missile systems. In effect she suggested that the United Nations Convention on the Law of the Sea (UNCLOS) should be rewritten so as to fit with China’s territorial claims.

A new WTO – whether we like it or not

Another example from Macaes book is that in January 2018 Joe Kaeser, CEO of Siemens made the same point: ”China’s Belt and Road will be a new World Trade Organisation – whether we like it or not.”

On a wide range of issues from the Internet to human rights and sovereignty claims in the South China Sea as well as global trade, China is putting forward a clear challenge to the existing liberal order.

We must understand that the BRI will provide an obvious conduit to export important elements of China’s political regime or at least its views.

We have long enough accepted the myth of reciprocity. Western decision-makers have been willing to an informal bargain where China could receive Western technology under the assumption that it would be just as open to Western political and economic ideas. BUT – the second half of that bargain never materialised. So in in practice we are now in a position where we have to develop a new China strategy almost overnight as we try to catch up with a BRI rollercoaster.

Read more about BRI

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