China's leader, President Xi Jinping launched the Belt and Road Initiative (BRI) in 2013 and offered financial support for development of seaports, railroads and highways in countries that were interested in joining this global. Ever since, China has invested more than $859 billion (2014-2021) in various investment projects outside China. The Chinese government has encouraged Chinese state-owned and private firms that have engineering and construction capacities to participate in these projects. It has also offered financing for these projects. China has offered billions of dollars of loans for these development projects to more than 60 countries that have joined the BRI.
These loans are offered based on the economic and commercial viability of each project but they do not come with any condition on the economic policies or the performance of the host government. The Chinese firms that participate in these projects are required to follow the laws and regulations of China and the host country. For more than four decades China has been a strong advocate of non-interference in domestic affairs of other nations. When it comes to the relations between the government and citizens of a country China rejects any type of foreign interference on issues such as human rights or political freedom or accountability of political leaders. China rejects interference of other countries in domestic affairs of China and it does not interfere in affairs of other countries.
This nonintervention policy has made China an attractive economic partner for many political leaders all around the world. The governments that face sharp criticism by Western nations for violation of human rights or for their economic policies, appreciate China's silence on their domestic affairs. While this noninterference policy has played an important role in the rapid expansion of China's economic relations with developing countries, it poses several risks for China's global interests in the long run. If the government of a country that has developed strong economic relations with China becomes too abusive and repressive towards its own citizens, China's image and economic interests might be harmed.
Should China demand good governance and sound economic policy as a condition for participation in the BRI? I believe it is in China's long term interest to establish some minimum governance and economic performance thresholds for BRI membership. The western countries and the international institutions such as the IMF, insist on market-oriented economic reforms, promotion of the private sector (and sometimes political/democratic reforms) as a condition for financial support to developing countries. They impose these conditions based on their ideological preferences and best practices of their own economic systems. China should also look into the key factors that have contributed to its economic miracle since 1978 for BRI conditionality.
Studies on China's economic success have identified some important governance and bureaucratic reforms as key factors for the success of China's economic miracle since 1978. For example Yuen Yuen Ang has shown that the wage and bonus of local government officials was linked to the amount of foreign investment and the GDP growth of the province. This reform created an incentive for the bureaucracy and political leadership of each province to focus on economic growth and investment.
To assure the long term success of the BRI projects in serving China's economic interests and the well being of the people in partner countries, China should insist on good and inclusive governance as a condition for its BRI loans. It appears that in some BRI countries bad governance and corruption are undermining the BRI projects (Sri Lanka and Iran for example.) The poor governance and repression in some countries that receive Chinese support has led to anti-Chinese sentiments. An evidence of this development in Kyrgyzstan has been reported by Doğukan Baş (2020). He demonstrates that the sentiment of Kyrgyz people toward China changed after they learned about corruption and bribery by high ranking government officials in management of Chinese Belt and Road projects in that country.
A specific bribery case that shook Kyrgyzstan in 2018 involved the Chinese construction firm TBEA. A government investigation revealed that TBEA had won a $400 million power plant construction contract by bribing Prime Minister Sapar Isakov.
Bad governance and poor economic performance in China's BRI partners can lead to anti-Chinese sentiments and harm China's international image by association even when it does not involve a BRI project. This can happen when the citizens of a country are angry with the poor performance or oppression of their political leaders, who have strong diplomatic and economic relations with China. In general In this bad governance practices in BRI partner countries can be categorized into five broad categories:
1) Corruption in BRI contracts that benefit the politicians and bureaucrats at the expense of ordinary citizens.
2) High levels of corruption in BRI partner countries, which does not involve Chinese firms but leads to anti-Chinese sentiments because people view China as a major supporter of the ruling regime.
3) Chinese participation and financing of mega-projects that are supported by the political leadership of a partner country, but face strong (majority) opposition among the citizens.
4) Repression and exclusion of a large segment of the citizens by a government that has strong economic and diplomatic ties with China.
5) BRI projects failing to serve the local (often ethnic minority) population despite full cooperation by the central government. This type of projects are best demonstrated by the Gwadar Commercial Port project in Pakistan. Gwadar in located in the Baluchistan region and the Baluch ethnic minority has expressed many grievances about the China Pakistan Economic Corridor (CPEC) projects in their province. These grievances have led to rising anti-Chinese sentiments in the Baluch community.
6) Lack of transparency and clarity in the Strategic Partnership Agreements and the Comprehensive Strategic Partnership Agreements that China signs with its BRI partners. In many countries the details of these agreements and specific project contracts are not shared with public. This secrecy and lack of information leads to suspicions and conspiracy theories, which encourage the perceptions that China is exploiting the host country.
Iran is another country in which the anti-Chinese sentiments have increased in the past decade. Iranian economy has declined and life has become more difficult for millions of Iranians in recent years. This decline is a result of the Western economic sanctions, bad economic policies and bad governance. Since the Iranian government has good relations with China, the Iranians that are angry with the ruling regime are projecting this anger toward China (and also Russia, which is also perceived as supporting the ruling regime with weapons and diplomatic support.) While any unbiased assessment of Iran's relations with China will reveal a mix of positive and negative consequences, the segments of the population that are alienated from the ruling Islamic regime, express very one-sided negative views about China.These negative views are in some ways similar to the anti-American sentiments that dominated public perceptions of Iranians about the United States in the final years of the Pahlavi Dynasty (1977-78), prior to the 1979 Islamic Revolution. Just as those anti-American sentiments influenced Iran-US relations after the 1979 revolution, the current escalating anti-Chinese sentiments can influence the future if Iran-China relations.
Awareness of Chinese Leadership: The negative impact of poor governance on BRI projects has not gone unnoticed by Chinese leaders. During the 2019 BRI Forum President Xi addressed this issue:
“We must have zero tolerance to corruption, China will only support open cooperation and clean governance when pursuing BRI cooperation. We will have to cooperate with member countries on how to fight corruption as well as on good governance by involving different political parties of those countries,”
This was a valuable first step and as the world recovers from the Covid-19 Pandemic, China should follow this warning with tangible and practical steps. Furthermore, good governance goes beyond assuring lack of corruption in BRI projects. As a condition for participation in the Belt and Road Initiative, China must insist on good governance by the political leaders in service of their citizens prosperity and well-being. This goes beyond good governance in management of BRI projects.
Cooperating with unpopular governments: China must also be mindful that the BRI projects in each partner country serve the national interest, not just the interests of the ruling elites. If China offers BRI support to ruling regimes that fail to improve the lives of their citizens, then the BRI projects that China finances will not benefit China or the host country. In countries that live under authoritarian regimes the society is often polarized between the supporters and opponents of the regime. In managing its relations with each country China must be mindful of its image in each camp. It must decide whether it wants to be perceived as the supporter of the ruling regime or be seen as neutral in domestic political disputes.
Chinese investments in ethnic provinces of a host country: When a host country has large ethnic minorities and China is investing in an ethnic minority province, it must make sure the province and its ethnic population will benefit from the investment projects that it is financing and implementing. With regard to the China-Pakistan Economic Corridor (CPEC) Chinese officials wanted to to make sure the Baluchistan region will benefit from employment and contract opportunities. China is developing the Gawadar seaport in this region. However as of 2023 the evidence shows that most of the jobs and contracts are awarded to workers and firms of the powerful provinces such as Punjab. The economic benefits for region's Baluch people has been very small and this discrimination has led to anger and discontent. China did not want such an unfair and unequal outcome. It was caused by the policies of the central government of Pakistan and the planning office which is in charge of allocating CPEC contracts to Pakistani firms.
Success stories: One of China's success stories in the Middle East was its ability to maintain good economic relations with Egypt during and after the Arab Spring uprisings which began in December 2010. China had good relations with President Hosni Mubarak, it developed good relations with the government of President Mohammed Morsi, which was elected in 2012 and was removed from power by General El-Sisi in July 2013. China was able to maintain good relations with the El-Sisi government that has governed Egypt ever since. This success can offer many lessons to China as it manages its relations with Iran and other countries. If the opposition to a ruling regime view China as the supporter of the regime, they might role back the economic and diplomatic relations with China in the event of a regime change.
In democratic developing countries such as Zambia, in which there is transparency about the composition of external debt, the available data does not support the arguments about the Chinese debt trap. Zambia's external debt data (published June 2021) has shown that it owed $5.05 billion to China, which amounts to 30% of Zambia's external debt. Hence Zambia owed more to non-Chinese lenders than China.
Support articles:
Baş, D. (2020). Rising Sinophobia in Kyrgyzstan: The Role of Political Corruption (Master's thesis, Middle East Technical University).