Report

Debunking the myth of ‘debt-trap diplomacy’: how recipient countries shape China’s Belt and Road Initiative

Publisher
Belt and Road Initiative (BRI) Public debt Relations with China World politics Economic development International relations
Description

The Belt and Road Initiative (BRI) is seen by some as a geopolitical strategy to ensnare countries in unsustainable debt and allow China undue influence. However, the available evidence challenges this position: economic factors are the primary driver of current BRI projects; China’s development financing system is too fragmented and poorly coordinated to pursue detailed strategic objectives; and developing-country governments and their associated political and economic interests determine the nature of BRI projects on their territory.

The BRI is being built piecemeal, through diverse bilateral interactions. Political-economy dynamics and governance problems on both sides have led to poorly conceived and managed projects. These have resulted in substantial negative economic, political, social and environmental consequences that are forcing China to adjust its BRI approach.

To improve the quality of BRI projects, Chinese policymakers should develop a coherent, integrated decision-making system with sufficient risk assessment capacities and strict, clear and enforceable rules. This would involve tackling vested interests within China, particularly among commercially oriented agencies and in the state-owned enterprise (SOE) sector.

Recipient governments must take greater responsibility for the evaluation of potential projects to ensure their viability and financial sustainability. They must also develop their ability to bargain with Chinese partners to make certain that local people benefit from the BRI. Since China continues to place great emphasis on host-country regulation, BRI partners must bolster their laws and regulatory environment.

Policymakers in non-BRI states should: avoid treating the fragmented activities of the BRI as if they were being strategically directed from the top down; provide alternative development financing options to recipient states; engage recipients and China to improve BRI governance; and help improve the transparency of ‘mega-projects’.

Publication Details
License type:
All Rights Reserved
Access Rights Type:
open