The opening Ceremony of the Second Belt and Road Forum for International Cooperation is held at the China National Convention Center in Beijing China, on April 26, 2019. Photo: Xinhua

JAKARTA (TheInsiderStories) – China hold the Belt and Road Forum for International Cooperation Summit on April 25-27. Around 37 world leaders meet at the summit and scheduled to discuss project financing that respects global debt goals and promotes green growth.

The Belt and Road Initiative (BRI) is a key policy of President Xi Jinping and envisions rebuilding the old silk road to connect China with Asia, Europe and international with massive infrastructure spending.

Reportedly, the United States (US) is only sending lower-level representatives, reflecting its unease over the scheme. The BRI is quite a controversy in the US, which views it as a means to spread Chinese influence abroad and saddle countries with unsustainable debt through nontransparent projects.

But, China’ greater international clout has as much to do with the self-initiated retreat of American leadership as it has to do with China’s return to wealth and power. The indifference of America’ political elite to foreign interests and perspectives as they bear on US policies has grown as the 21st century has advanced. This has been formalized in the President Donald Trump policy guideline, “America first.”

In terms of its approach to global governance and interactions, the US now officially relegates the interests of America’s allies, partners, and transnational institutions behind its own nationals concerns. American disregard for the impact on others of US policies gives them no incentive to follow Washington’s lead. The US now wants to cut deals, not make rules.

This is the context within which China has been inventing new international financial institutions like the Asian Infrastructure Investment Bank (AIIB) and others. In the aggregate, these banks and funds are capitalized at almost US$300 billion and promise to add $60-$75 billion to annual lending for infrastructure projects in Asia and its periphery.

This is considerably more than IMF, World Bank, and Asian Development Bank (ADB) have been able to do.The AIIB is off to a fast start, with almost $2 billion in projects already approved. Most of its projects to date have been co-financed with the World Bank and ADB.

Still, the ADB estimates that requirements for investment in infrastructure in Asia are $700-$800 billion annually. A lot of money will have to come directly from China, its partners in infrastructure projects, and other Asian and international investors and lenders.

China has set a goal of $2.5 trillion in trade with BRI partner countries by 2025.  In support of this, Beijing is doing more than setting up new institutions. It is encouraging mergers, acquisitions, and green-field investments to create multinational companies with Chinese characteristics.

Its promoting uniform standards for trade, transport, and communications. It is the world’s largest emerging platform for international business collaboration. Its aim is to integrate the world with a network of roads, railroads, pipelines, telecommunications links, ports, airports, and industrial development zones.

The massive infrastructure projects envisaged by the BRI promise to deliver major increases in the speed of transport and telecommunications, to lower costs, and to create a great many new jobs. They will integrate Russia and Central Asia with both China and Europe while connecting South Asia by land and sea to the markets and natural resources of the countries to its north as well as to Africa.

It will open a vast area to economic and cultural exchange, reducing barriers to international cooperation. At least 890 projects for new roads, high-speed railways, pipelines, ports, airports, and inland telecommunications links are to boost the efficiency of overland travel and economic transactions across Eurasia.

The vast space from the Atlantic to the Pacific and from the Pacific to the Middle East and the Indian Ocean is to be laced with industrial development corridors and special economic zones that draw on these links to create centers of economic activity. Network effects assure benefits not just to China as the initiative’s leader but to every country touched by it.

BRI is also certainly attractive to maritime axis countries such as Indonesia which have potential connectivity between islands, development of the shipping industry and wealth of natural resources. The government is currently planning to offer 28 projects worth $92.57 billion.

So far, China’ BRI investment in Indonesia has reached $5 billion. This investment consists of funding for the Jakarta-Bandung high-speed train of around $1 billion and an abundance of funds from the China Development Bank for three state-owned banks of $1 billion each.

China’ experience with the impact of expanded infrastructure on its own territory has amply demonstrated the extent to which it can integrate economic geography in an arbitrarily divided supercontinent like Eurasia.

China built its first American-style expressway in 1990. In 2011, the length of China’s expressway network passed that of the US. It continues to grow. At 123,000 kilometers in length, it is now by far the world’s longest.

In 2015, China built another 11,050 kilometers of the expressway. China’s first high-speed rail line opened in 2007. At more than 20,000 kilometers, China’ high-speed rail lines are now by far the most extensive in the world.

They have an annual ridership of over 1.1 billion passengers. China expects to lay another 15,000 kilometers of the track by 2025.

All new roads and railways in China connect to vastly expanded airports and ports. China has built 82 new airports and expanded 101 existing ones.

Over 80 percent of Chinese are now within 100 kilometers of an airport. A similar wave of expansions has given China seven of the world’s ten largest and busiest ports. Meanwhile, China is the first nation in the world to build a grid based on long-distance ultra-high-voltage power transmission, a technology in which it has become the global leader.

China has reaped many of the same economic benefits from this expanded infrastructure. It should be obvious that the BRI also carries significant economic and political risks for China, as well as for recipient countries and local communities.

The availability of credit does not guarantee the availability of financially attractive projects. The institutions China has created to support it expects to make a profit on their investments. At the moment, there is still more money on offer than there are economically viable projects. That is a recipe for corruption.

Then, China has a record of making extravagant offers of credits abroad that are then underutilized. This justifies a certain measure of skepticism about the numbers China has attached to its aspirations. Not all of the money China is making available will find projects.

Still, given China’ emphasis on collaborative planning with foreign partners, a good deal of it seems certain to be used actually to build things. Some projects will be financially attractive or made so. Others may be more problematic. The market will decide.

The risks are always in the details, but if China’s vision is realized in any significant respect, in time all roads and other physical linkages in Eurasia will connect to Beijing. China will become the center of economic gravity of a vast, loosely integrated region that already has 55 percent of world GNP, 70 percent of the global population, and 75 percent of known energy reserves.

If it works, the BRI will place China in an ever more central position of influence on the Eurasian landmass and the world.

Written by Lexy Nantu, Email: lexy@theinsiderstories.com