Engage but Criticize: Managing the Canadian Response to the Belt and Road Initiative

What right did the international community have to denounce China’s Belt and Road Initiative (BRI) in the first place?

by | Sep 28, 2018

Pixabay – Piro4d

At the beginning of September 2018, Beijing hosted the 3rd Forum for China-Africa Cooperation (FOCAC). Nearly every African head of state joined the landmark conference, with only Swaziland declining to attend. At the Forum, President Xi Jinping promised to deploy some $50 billion in state funds to the continent.

President Xi’s address was particularly noteworthy because he announced that $15 billion of that $50 billion will come in the form of foreign aid, concessional loans, and interest-free loans. In addition, President Xi explicitly warned that the promised resources were “not to be spent on any vanity projects.” In short, the Chinese state has pledged to deploy its money responsibly.

These promises are meant to stymie international accusations of economic imperialism. In recent months, many analysts (myself included) have criticized the Chinese government for engaging in debt-trap diplomacy – that is, using poorly-structured debt terms to engender dependency in developing countries. President Xi’s statements prove that the Chinese state cares about its international reputation and remains eager to rebrand itself as a beneficent force.

This begs the question: what right did the international community have to denounce China’s Belt and Road Initiative (BRI) in the first place? Leo Luo implicitly asks this question in his recent article for the Canadian International Council. In criticizing an earlier essay of mine, Luo concludes that Canada ought to cooperate with China, rather than confront it. He deploys two supporting arguments, first casting the United States and the liberal international order as hypocritical, and then arguing that developing countries are in desperate need of Chinese money. My response addresses those arguments, ultimately concluding that there may be room for cooperation with Chinese foreign policy – but that we should not shirk from criticizing it as well.

To respond to Luo’s first argument, few analysts would disagree that the United States has, like China, consistently acted in self-interest. The United States, Luo contends, has benefited from “its monopoly on the flow of global finance.” Of course, this view ignores the benefits that other countries have derived from what G. John Ikenberry has called American liberal hegemony – benefits ranging from the US “provision of security and economic public goods” to the “mutually agreeable rules and institutions” that have promoted democracy and open trade around the world. It also overlooks the extent to which the United States has willingly allowed itself to be tied down by the rules-based international order.

American foreign policy may be self-interested, but it has also tended to be positive-sum in nature – to be mutually beneficial to all the parties concerned. This can be contrasted to China’s approach of debt-trap diplomacy, which is often designed to inordinately benefit one party over another. This zero-sum approach is evidenced by China’s preference for bilateral transactions over multilateral institutions; bilateralism allows Beijing to leverage its often-superior political and economic might.

To be sure, there are exceptions to the American positive-sum approach. But even if we focus solely on these exceptions, this does not make overbearing Chinese loan terms any more acceptable. Put simply, two wrongs don’t make a right.

China’s debt diplomacy is worrying because it could create unacceptable costs for countries receiving Chinese funding and ultimately backfire on China. This brings us to Luo’s second argument: that many member countries of BRI “cannot convince the global financial system to invest capital in critical infrastructure.”

Again, Luo is correct, but misses the larger point. China has deep pockets and is funding countries that have had trouble attracting foreign aid. For developing countries like Tajikistan or El Salvador, Chinese money, coupled with responsible financing terms, could mean real integration into the global economy. That is a goal that the entire world ought to celebrate.

But not all money is good money. It is worth noting that Luo does not contest my arguments on debt-trap diplomacy. Instead, he argues that BRI projects will benefit recipient countries, “no matter how they are financed.” That is a dangerous argument. It also goes to the heart of the difference between the more positive-sum approach of the US and the zero-sum approach that China has tended to favour. If China relies on debt-trap diplomacy, it will provoke more than just anti-Chinese sentiment in recipient countries.

In his sweeping book, China’s Asian Dream, Tom Miller writes: “from Gabon to Papua New Guinea, irresponsible business practices have provoked anti-Chinese backlashes.”[1] In Central Asia, Miller continues, the “fear of ‘yellow peril’ remains alive” and has led to racial jokes against the Chinese.[2] More concretely, such backlash has at times devolved into violent attacks on Chinese citizens and on Chinese-funded infrastructure.

Countries in Central Asia and Sub-Saharan Africa are indeed in desperate need of generous financing. But if China relies on inequitable free trade agreements and onerous debt-repayment terms to meet those countries’ needs, it will likely cause nationalist backlash, regional instability, and other unforeseen consequences. What China may do in such circumstances is a great unknown, although its efforts at acquiring military power projection capabilities and possible basing infrastructure – with a base in Djibouti and rumours of possible bases in Afghanistan, Pakistan, and Vanuatu – are a worrisome sign.

Luo’s final conclusion is that Canada ought to engage and cooperate with China. He is to some extent correct. Canadian policymakers should by no means boycott Chinese financial institutions. Certainly, the decision the join the Asian Infrastructure Investment Bank (AIIB) was a sound one and could grant Canadian firms access to a number of lucrative infrastructure projects.  At the same time, however, Canadian firms and policymakers should carefully ensure that any AIIB projects funded with Canadian money do not contribute to state cronyism.

By implicitly suggesting that Canada has only two choices in dealing with China – cooperation or confrontation – Luo paints a simplistic picture of how Canadian foreign policy ought to proceed. There is no reason why engagement cannot come with sharp criticism. Engaging with China cannot mean turning a blind eye to practices that the Canadian government finds problematic. This extends beyond economic questions, of course, to issues such as the internment of Uighurs in Xinjiang province or ongoing territorial disputes in the South China Sea.

Canada cannot merely rely on Chinese expressions of goodwill. BRI may be a promising venture. If done well, it could reshape the global economy and bring about tangible gains for people around the world. But there are important reasons to be wary about this initiative. And, as President Xi’s promises at FOCAC demonstrate, BRI will bring about such net benefits only if the international community keeps up the constant criticism of how China has traditionally approached these matters.

If the Chinese state fails to change its strategy of engaging in debt-trap diplomacy, it will soon discover that empire building, as opposed to facilitating mutually-beneficial international cooperation, is an expensive and indeed lonely affair.

Notes

[1] Tom Miller, China’s Asian Dream: Empire Building along the New Silk Road, (London: Zed Books, 2017), 131-132.

[2] Miller, China’s Asian Dream: Empire Building along the New Silk Road, 81.

 

Author

Preston Lim is a graduate of the Schwarzman Scholars program and received his Master’s in Global Affairs from Tsinghua University.