Silk Road Headlines_9th January, 2019

A survey by the ISEAS-Yusof Ishak Institute in Singapore indicates that Southeast Asian countries have little faith in the United States as a provider of regional security [Southeast Asia wary of China's Belt and Road project, skeptical of U.S.: survey]. The respondents see American global influence as deteriorating and China as the only viable alternative to US leadership in the region. Many of those who participated in the survey – Southeast Asians who work in media, business, government, civil society, or academia – already consider China to have greater economic and political influence in their region than the US. With regard to the Belt and Road Initiative, a majority of the respondents believe that their governments should be cautious about BRI in order to avoid falling into a debt-trap. But at the same time, China’s capacity for providing needed infrastructure funding was acknowledged. Very few respondents thought that their governments should avoid BRI projects altogether. These findings suggest that, so far, Trump’s trade and technology war with China has not prevented Southeast Asians from regarding the US as a declining power. Countries in the region seem to feel that they are increasingly on their own when it comes to dealing with BRI and China’s growing influence.   

An insightful article on this week’s list focuses on the debt-trap issue [Beyond “Debt-Trap Diplomacy”: The Dissemination of PRC State Capitalism]. Hong Zhang discusses the roles that Chinese state-owned enterprises have played with regard to the port of Hambantota in Sri Lanka. Hambantota is frequently referred to as a major example of how BRI is essentially a debt-trap for developing countries. The author makes a strong case that the debt-trap diplomacy narrative ‘fails to capture the critical, changing role played by China’s SOEs, the driving force of China’s global economic expansion’. In the case of Hambantota, the main Chinese companies involved have been Ex-Im Bank (which lent the money for the construction), CHEC (which built the port) and China Merchants (which took over the debt in exchange for a 99-year lease of the port). The role played by the latter is especially relevant. Although debt relief was important, China Merchants also offered to develop an industrial park near to the port. The park is intended to create additional traffic for the port and to drive urbanization in the area. It is this ‘port-park-city’ model that constitutes a ‘state capitalism package’. The Chinese part-state has the capacity to mobilize state-owned enterprises to develop Hambanota into a major hub. According to Zhang, debt-trap risks are not the main issue. What is, is ‘the penetration of the global economy by PRC “national champion” state-owned enterprises, which will serve to entrench and legitimize the PRC development model’. If China’s strategic aim is not to control a handful of foreign ports but to achieve a more fundamental level of control over the global economy, then debt-trap diplomacy is not necessarily, or even likely, a core feature of BRI.

By Clingendael