Daniel Wagner

Opinion | China’s dreams of world leadership are fading as its belt and road projects start to sour

The Belt and Road Initiative, hailed for promoting development, is coming under fire as debt burdens grow, reflecting a growing wariness of Beijing’s posturing as a global leader-in-waiting on an international stage that seeks to promote debate rather than censor it

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President Xi Jinping has become accustomed to casting himself and China as natural heirs to the leadership of the global system. But is a country that regularly violates global norms, standards and laws really the right country to lead the world? Photo: Xinhua

Daniel Wagner

Published: 3:00am, 5 Feb 2020Updated: 5:48am, 5 Feb 2020

A good way to measure China’s appeal for the rest of the world is to gauge the success of its Belt and Road Initiative.

As of last September, Beijing had signed more than 190 cooperation documents with more than 160 countries and international organisations in support of the trade initiative to link economies into a China-centred trading network. Its cumulative investment has exceeded US$100 billion, with construction projects valued at a staggering US$720 billion.

Yet the initiative had begun slowing by 2018. This was due, in part, to a decline in Chinese funds available for investment. Chinese state banks had become more cautious about lending as the trade war with the United States commenced.

Chinese state-owned enterprises were still moving car and steel capacity overseas, and building highways and cement plants in developing economies, but on a much smaller scale compared to their 2016 investment peak. Some countries (such as Myanmar, Sierra Leone and Tanzania) had become hesitant about continuing to borrowing large sums for fear of a debt trap.

Beijing had also become more attuned to the flip side of debt-trap diplomacy: not being paid. The fear of an unaligned balance of payments, combined with exchange-rate weakness from the US trade war, caused a rationing of hard currency. Beijing had come to realise that some belt and road projects had led to excessive debt levels for some countries.

Beijing is now being criticised by the very same countries supposed to be praising China for promoting development via belt and road projects. Host governments are more carefully scrutinising belt and road projects and associated costs. Beijing has learned it cannot simply dictate the terms of engagement for bilateral relations or cross-border trade and investment.

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