China’s economic and political footprint has expanded so rapidly that many countries, even those with relatively strong state institutions and civil society organizations, found it difficult to manage the effects of this extension. The United States and the advanced industrial democracies of Japan, Australia and Western Europe are paying more and more attention to this issue. Whether Beijing seeks to use debt as a tool to expand its influence and leverage over other countries remains under debate.
The Belt and Road Initiative ( BRI) is the foundation of President Xi Jinping’s foreign policy through which China is trying to establish connections with more than 100 countries in the world. The BRI was officially launched by Xi in 2013, and was added into China’s constitution in 2017, The Economist reported.
The projects revolve around the improvement of physical infrastructure in these countries in order to open trade routes and transport corridors that approximately correspond to the historic Silk Road routes that consisted of both land and sea corridors connecting the East and the West to each other.
From the British point of view of BBC‘s, despite that China being technically a “communist” country, the government had put its faith in trickle-down economics, believing that allowing some people to become extremely rich would benefit all of society by dragging it out of the disastrous quagmire of Chairman Mao’s Cultural Revolution as quickly as possible.
After the 1989 fall of communism in the Soviet bloc, five self-declared communist states remain today: China, Cuba, Laos, North Korea and Vietnam. Belarus and Venezuela can also be added to the mix as they fulfil the criteria of a communist state – even though they do not officially invoke the ideology. So, at present, the number stands at seven. Another question arising now is that if capitalism is the engine of China’s economy at present, what is communism today? And if the number of communist states is poised to grow in the near future, as some predict, what does this prospect mean for capitalism?
China managed to fend off the post-Mao malaise with the introduction of Deng Xiaoping’s reforms in late 1978, which redefined for several decades the meaning of the special brand of Leninism known since the 1980s as “socialism with Chinese characteristics”. Yet only a decade later, the PRC became an international pariah again after the brutal suppression of the 1989 democracy movement known as the “Beijing Spring”.
Few would have contemplated, much less predicted, in 1989 that the PRC would rise again so soon and so dramatically, and become within a few short decades a major global player, aspiring, plausibly, to (re)design the “future of all mankind”. Yet it was, arguably, exactly this hopeful, pivotal year of 1989 that set China on this path and ultimately led to its current position in the world.
There is no place for dissent that would disrupt the harmony between the wise rulers and the devoted masses. The market economy and private ownership are only tolerated insofar as they help the party achieve its goals. The country is ruled by law, but it is the party that decides what the law is and interprets it as needed. As Xi Jinping declares, the main feature of the New Era is the unquestionable leadership of the party in all aspects of life. He is fond of quoting Chairman Mao’s adage: “The Party, the government, the army, the people, the education; East West South North and the centre—the Party leads it all !
In the beginning of China’s expansion, it was about the potential of China, especially after Deng’s Open-Door Policy. In the second stage, the discussion transformed from its possibilities to its increasing influence on the global economy, especially after its membership to the World Trade Organization. In the third and last stage, especially after BRI, the discussion is shifting to China’s ever more complex balancing act between nations.
China ‘s Belt and Road Initiative (BRI) in the Eastern Mediterranean region
The Eastern Mediterranean remains a region of critical importance for the United States and the West. Through Greece and Cyprus, it is a frontier of the European Union. Through Greece and Turkey, it is also a NATO frontier. The presence of Israel, a unique U.S. ally, adds to the region’s geopolitical significance. Coupled with the fallout from the conflict in Syria, the rise in political tensions, close encounters between military forces, and overlapping territorial and resource claims among allies and partners in the region, divisions and instability have increased. These developments have created opportunities not just for Russia, but increasingly for China to exert influence.
For the record, during the era of the Egyptian leader Gamal Abdel Nasser, Egypt was the first Middle Eastern and African country to recognize the People’s Republic of China in 1956. Former President Hosni Mubarak was one of the first foreign leaders to visit Beijing after the 1989 Tiananmen Square massacre.
It is no surprise the Chinese state-owned conglomerate TEDA is the biggest investor in the Suez Canal industrial zone near the city of Ain Sokhna. The company operates an industrial park with 85 companies and more than 4,000 employees.
China’s Belt and Road Initiative (BRI) project , of which the Mediterranean is a key part, has forced the United States and Europe to think more seriously about geopolitics for the first time since the Cold War. Geopolitical competition requires the orchestration of political, economic, and security instruments in the words of China’s Foreign Minister. The challenge for the United States and Europe going forward will be to agree on the problems posed by BRI, and then to develop a set of integrated strategies in response.
The sudden Chinese economic growth occurring at the end of the 1970s, coupled with its government’s strategy to promote Chinese investment abroad at the end of the 1990s gradually reduced the economic gap between China and the Mediterranean. Under Xi Jinping, Chinese diplomacy has become more active, not only through the Belt and Road Initiative (BRI), but also by expanding their economy globally.
China heavily invests in infrastructure and acquisitions of European companies. Especially in the Eastern Mediterranean, China is building an enormous economic presence. Its involvement in major infrastructure projects is growing at a rapid pace and may have a significant impact on trade routes that traverse this strategically located region.
The Mediterranean Sea is one of the most important maritime highways of all international trade routes around the globe. It is a focal point, as it represents the western end of the BRI. Given the Mediterranean’s strategic position, China has stepped up its presence in the region by acquiring, building, modernizing, expanding, and operating the most important Mediterranean ports and terminals in Greece, Egypt, Algeria, Turkey, and Israel. Beijing wants to capitalize on the Mediterranean’s geographical proximity to become a major distribution hub for Chinese goods to the European Union (EU), its biggest trading partner. The increasing economic ties between China and Europe are giving the Mediterranean region an opportunity to regain its place at the forefront of international trade.
China is the main geopolitical rival to the United States in the Asia Pacific region. As this rivalry intensifies, it is likely to affect other regions. China has major ambitions in the Eastern Mediterranean in the area of infrastructure and transportation, and the greater its regional involvement becomes, the larger the risk becomes of this spill-over effect, regarding a potential economic trade war with other nations.
China’s activities in the area, while relatively new, are growing in scale. In the sphere of investment and trade, the Eastern Mediterranean is a conduit for Chinese power into Europe. Through the Belt and Road Initiative (BRI), China has gained influence over strategic infrastructure, from 5G networks to port facilities. Two important examples include a nearly €600 million investment in the Greek port of Piraeus (dating back to 2006), and China’s success in bringing Italy on board to the BRI in March 2019.
In addition, China also continues bilateral negotiations with Turkey on the Port of Izmir, and Istanbul holds strategic importance for the BRI. Its alliance with Egypt constitutes a very critical point for China’s trade because of the significance of the Suez Canal for intercontinental maritime trade from Asia to Europe. Moreover, China also has the right to manage the Port of Ashdod in Israel for forty-nine years.
For China, the way to secure the BRI’s trade interests in the Mediterranean is not only to abstain from intervention in the domestic politics of other countries, but also to prevent any conflict between those countries.
- The BRI as a debt trap for less-developed countries ?
However, labeling the BRI a debt trap is not only insulting to the borrowing countries, who feel they are being accused of gullibility, but it also neglects the domestic root of this debt problem. Although China often claims that it is not exporting its system of governance, the BRI’s “hidden debt” is an offshoot of the public-private partnership (PPP) trend that took off within China over the past decade as more and more local governments leveraged capital from the business sector to help fund large infrastructure projects.
To be sure, China is not the only country spreading the PPP gospel, which began in Western countries and gained support from multilateral development banks as a solution to the Global South’s infrastructure gap. Still, whether in the West or China, PPPs have not proven to be a silver bullet. Many projects suffered heavy losses that eventually required a public bailout.
In China, PPPs are particularly problematic given that state-owned enterprises, with their privileged access to China’s state-controlled financial system, often act as the local governments’ “private” partners in PPP projects. This off-balance-sheet financial arrangement, coupled with inevitable moral hazard problems, has perpetuated China’s string of inefficient domestic investments, such as the infamous “ghost towns” that blight many parts of the country. While Beijing-backed overseas PPP projects have caught the U.S. foreign policy circle’s attention, it is important to keep in mind that China’s domestic hidden debt is a much bigger concern for Beijing. A September 2017 report estimated China’s PPP projects at around $2.7 trillion.
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