On January 8th, 2018, a student delegation from SIPA met in Beijing with officials from the China Institute of International Studies (CIIIS), the in-house think tank for China’s Ministry of Foreign Affairs. We discussed their famous “One Belt One Road Initiative” (B&R), which is Chinese President Xi Jinping’s flagship infrastructure project that includes over 60 countries spanning across Asia, Africa, Latin America and Europe.
During a May 2017 conference, President Xi championed the initiative as a way to “uphold and grow an open world economy.” He all but invited the United States to join, saying that “all countries, from either Asia, Europe, Africa or the Americas, [should] be international cooperation partners of the Belt and Road Initiative.”
Our hosts at CIIS elaborated on the opportunity that this initiative posed by describing the benefits that other nations have already acquired, especially the $14.5 billion in direct Chinese investment that had led to 180,000 jobs created in those countries. In terms of benefits to China, they merely described how the initiative offered China “a precious opportunity to learn how to behave [on the world stage].”
Yet, this Chinese coyness doesn’t quite match up with the rhetoric behind closed doors. In leaked remarks from a January 2017 Communist Party meeting, a top general and strategist for the party leadership, Major General Jin Yinan, described America’s recent withdrawal from the world stage as an opening for China: “We are quiet about it. We repeatedly state that Trump ‘harms China.’ We want to keep it that way … [but] as the U.S. retreats globally, China shows up.”
In fact, the FY 2018 budget released by the Trump Administration proposed a 37% reduction in foreign aid and development, containing scant mention of investing in Asian countries and all but ceding leadership in the continent to China.
China has already begun to take advantage of this opportunity. Faced by sluggish economic growth and falling exports, China has become too dependent on government investments in recent years, and seeks to shift from an export-driven growth model to a consumer-driven one. China’s economic growth has been steadily slowing in recent years, from 10.3% in 2010 to 6.8% in 2017, while China’s debt has grown to 250% of its GDP, prompting a downgrade of its sovereign debt rating from Moody’s. Through the B&R initiative, the country is able to export their top-of-the-line construction and engineering expertise into new markets, while simultaneously creating new markets for their goods and services. At the same time, the argument goes, the beneficiaries are able to fast-track their development by building bridges, railways, ports and other critical infrastructure with Chinese investment.
However, the picture becomes significantly less rosy when considering the terms often placed on these investments by Beijing, as well as the threat to national sovereignty when the finances go awry.
Sri Lanka illustrates a telling example of the risks that could come with accepting Chinese money. In 2010, Beijing invested $1.5 billion to fund the development of a strategically vital port in Sri Lanka’s Hambantota district, despite the fact that it was largely seen as an economically unviable project from the get-go. By 2017, Sri Lanka’s debt had skyrocketed and the loan went unpaid. That year, Sri Lanka was forced to come to the bargaining table with China to discuss terms of repayment. While the full details of the plan have not been made public, we do know that by December 2017, Sri Lanka formally ceded control of its port to China in a 99-year lease.
This granted Beijing a long-term strategic asset by adding a ‘pearl in its string of pearls’ – it allowed them to have a presence in the Indian Ocean, an area with key shipping lanes through which much of the world’s trade passes en route to China. More importantly, it allowed China to project their power to India, with whom they are engaged in a shadow boxing match for the future of Asia’s trade; Sri Lanka has long been a key ally of India.
The economic benefits from the Belt and Road Initiative are closely intertwined with China’s national security interests. At a recent SIPA event, Dr. Andrew Nathan, renowned China expert and professor of political science at Columbia, described how China’s willingness to invest in other countries benefits the country politically when “nobody else is playing the game – there’s only Chinese money available – and so there’s only upsides in it for Beijing.”
One of the biggest advantages of the initiative for China is the excuse to create new strategic military bases, as China did in Djibouti for the first time in 2016. The base, which was financed through a $1.4 billion investment package under the Belt and Road Initiative, houses critical military infrastructure such as barracks, storage and maintenance units, as well as docking facilities for China’s naval fleet. Due to Djibouti’s location at the southern entrance of the Red Sea on the route to the Suez Canal, the opening of the base establishes China as a central player in Africa. The base allows China to take the lead in the region’s top security issues, such as combating piracy, peacekeeping, and counterterrorism.
Countering this Chinese dominance requires a sea change from this current Administration’s approach to international development, and will likely require leadership from Congress. A well-crafted development plan must include funding for critical infrastructure, such as roads, railways, canals, as well as for key needs such as power and medicine. When done currently, such a plan has the potential to address some of the root causes of the problems facing the United States, such as migration patterns from Central America and extremism in parts of Asia and Africa. When done correctly, strategic international aid has the potential to stimulate economic progress, increase security cooperation, and promote democratic values around the world.
Describing the recently-initiated Marshall Plan in 1949, President Harry S. Truman affirmed his belief that the Marshall Plan was an investment on peace, when he said that “in years to come, we shall look back upon this undertaking as the dividing line between the old era of world affairs and the new–the dividing line between the old era of national suspicion economic hostility, and isolationism, and the new era of mutual cooperation to increase the prosperity of people throughout the world.”
In the years to come, Truman’s prediction would prove true. Following World War II, President Truman and Secretary Marshall decided to help rebuild Western Europe and counterbalance Soviet threats with the Marshall Plan. At the same time, Truman and Marshall sent aid to allies in Asia, and tens of thousands of even more Americans ended up giving their lives fighting communist threats in Asia throughout the Cold War. This great sacrifice in blood and treasure ultimately led to the rise of powerful European and Asian allies who rebuilt themselves and helped the US win the Cold War, uphold liberal international order, and reap economic benefits immeasurably higher than the amount of aid the US had provided.
International aid programs are proven to be one of the most successful tenets of United States foreign policy by consistently producing the highest dividends for the investment; in short, the aid program is the most cost-effective way of securing America’s long-term interests and cementing our position of leadership in the world.
We are quickly eroding that position of leadership, as the Trump Administration retreats from the world and allows our competitors to set the global agenda. Unless we propose our own robust and comprehensive strategy for international development, we may look back at this time as the defining line between the old and new era was again redefined – and we ended up on the wrong side.