Panel, Conference Presentation
China's Belt and Road Initiative: Threat, Opportunity, or Both?
Milken InstituteAmy Celico, Karim Al-Wadi, Evelyn Farkas, Guo Chentao, Ekaterina Miroshnik, Amy Sellecko
- The Belt and Road Initiative is viewed as a dual-edged opportunity for Europe to provide infrastructure, finance, and green funding via Central Asia, while simultaneously posing risks to free trade, the rules-based economic system, and US-Europe alignment, with concerns that Chinese actions may challenge US interests or drive a wedge between the US and EU.
- The European Union seeks to deepen cooperation with China rather than isolate the country, demanding a level playing field with strict adherence to labor rights, financial sustainability, and environmental standards to avoid unhealthy competition.
- Specific investment opportunities are identified in Central Asia, particularly Kazakhstan and Uzbekistan, where the EBRD anticipates benefits from transit and PPPs, with a pre-qualification deadline for the Almaty rail bypass set for February of the following year.
- Privatization plans in Kazakhstan and Uzbekistan are scheduled to take several years (three to four years), involving assets such as Air Astana (planned IPO next year), freight rail operators, and various airports, alongside government efforts to introduce PPP legislation.
- Infrastructure connectivity is projected to significantly improve trade flows between China and Western Europe, with 11,000 freight trains currently moving 920,000 containers across 15 countries, and future routes potentially enabling rail transport of goods like Norwegian salmon that were previously impossible.
- China has announced a target to achieve a moderately prosperous society and eradicate poverty by 2020, with specific hard targets to reduce pollutant emissions enforced by penalties for local government leaders who fail to meet them.
- Economic impact projections suggest that every $1 billion invested in infrastructure generates an additional $2.5 billion in GDP and creates 50,000 to 80,000 jobs, while $100 in infrastructure investment drives $70 in imports, 40% of which are sourced from developed countries.
- The initiative is described as a flexible "sketch" or "drawing" rather than a rigid roadmap, evolving through a "crossing the river by feeling the stones" approach, which has already prompted other nations to initiate their own Belt and Road versions within five years.
- HSBC announced an allocation of $20 billion to support the Belt and Road initiative prior to 2020, and the initiative has already generated significant power infrastructure in Africa, now accounting for one-third of the continent's power.
- Concerns regarding debt sustainability and political influence persist, citing examples such as Montenegro's highway debt equating to a quarter of its GDP and Sri Lanka's port deal extending to Chinese control until 2116 due to indebtedness.
- Portugal is set to formally join the Belt and Road Initiative within days, whereas Spain recently declined to join before the G20 summit, highlighting divergent European responses to the proposal.
- Chinese corporate and governmental efforts are shifting to project a "green" image, exemplified by the AIIB's "lean and green" motto, joint green funds with the UK and US, and the promotion of abandoning coal to prevent environmental degradation in the Northern Hemisphere.
- Final economic viability of specific projects like the Almaty Rail Bypass remains contingent upon receiving final government support, while other sectors including hospitals, utilities, and roads in southern Kazakhstan are expected to follow the Public-Private Partnership scheme.