CHINA’S BELT AND ROAD INITIATIVES: CONTOURS, IMPLICATIONS AND ALTERNATIVES

This research paper is a product of the research collaboration between the National Maritime Foundation, New Delhi and the Maritime Policy and Strategy Research Center, Haifa University (HMS), Israel, with the aim of providing policy recommendations to the respective governments of India and Israel. The article was first published on the HMS website in December 2020.

Introduction

Over the past few years, China’s Belt and Road Initiative (BRI) has generated substantial interest amongst various countries, irrespective of their individual approaches to sustainable growth in their national policies. There is either increasing keenness to collaborate with China in this initiative or to maintain a guarded and cautious approach. Even the political analysts and policymakers, both admirers and critics, acknowledge that China’s rise and its impact on the world can no longer be ignored. The progress of BRI has been so unflustered, that either a methodological intellectual spade work has affirmed the actions on ground or it is the vacuity of competitive initiatives by the rest that the Chinese have quietly filled in the space for infrastructure development and global connectivity for economic enhancement. The political-economic approach of China makes the magnitude of the BRI projects quite appealing. Therefore, it becomes important to examine the true constructs behind the BRI and analyse the benefits and the adverse impact emanating from this geo-strategy. Even the risks for China are of great magnitude, considering the huge financial investments it has committed to its various overseas projects, many of which are presently in incipient stages and are far from being optimised. To keep the scope of the paper more specific in nature, the focus area will be to examine the genesis of Maritime Silk Route and the scope and need for a balanced approach towards trans-regional connectivity in the world.

 

Factors contributing towards Belt and Road Initiative (BRI)

A sovereign state must identify the critical issues which it needs to consecrate to achieve quantified materialistic success for the greater well-being of its people. Paradoxical geo-economic perspectives will lead to mismanagement of the critical national resources and will cause large scale civil unrest. In democracies, there are provisions for alternative governance to match the citizens’ aspirations. In addition, power is delegated through multiple structures counterbalancing and complementing each other consistently. However, frequent changes in the governments and consistent realignment of objectives, adversely affects the efficiency in executing development tasks. In addition, mandatorily seeking consensus in decision-making slows down policy implementation. This model of democracy applies to many nations, including the powerful ones. On the other hand, nations that have evolved a different, non-democratic form of governance have failed to stay impactful.  As a clear exception to this phenomenon, China is seen as immutable.

China with a communist form of governance has its own advantages and disadvantages. Interestingly, the concept of communism has been uniquely redefined by the political leadership of China ensuring their relevance through propitious policies. Today, under the Chinese model the socialist values have been eschewed for a capitalist economy, without destabilising the Chinese Communist Party’s (CCP) paramountcy. Although, many political analysts feel that the CCP General Secretary Xi Jinping’s strongman leadership may also reform the political structure within the country (Mohanty, 2013). Xi has been in power since 2012 and is seen as a more assertive leader whose preponderance in the Party at present is quite unmatched, special after 2018 National Congress of the Communist Party of China. Under such a stable and strong political leadership, China does not face the challenge of frequently realigning public policy for development, which helps it to achieve its long term goals in a more quantifiable manner. Thus, the inertia at the political front gets highly mitigated and this liberates the government to focus on actual issues. However, there is also no denying the fact that the government of China is quite sensitive to public opinion. The concerns of the people are under constant vigilance to ensure that the Party does not get alienated from their aspirations. For instance in terms of well-being of people, the average life expectancy has increased in China since 1978 by more than 10 years. Hundreds of millions of residents have gone from poverty (defined by the World Bank as less than US $ 1.9 a day) to the status of an urban middle class with all social and demographic changes associated to such change- such as political behavior, patterns of consumption, internal migration. In addition, at the macroeconomic level, growth and openness in the Chinese economy has meant the development of an economy with characteristics of a market economy as opposed to the Communist-planned economy that dominated China in the 1960s and 1970s.

Still, about 100 million of population in China lives below the poverty line and Beijing has implemented many innovative policies for changing their economic condition. For instance, the government officials have been exhorted to take over the responsibility of credible assistance to poor families, ensuring them better sources for income generation[1]. Many similar schemes are currently working in China and the government is hopeful that in the next decade, it will be able to eradicate poverty from their country. However, as an outcome of such monitoring there exists visible state control in people’s life. The new social credit system continuously keeps the activities of the Chinese people under surveillance and those who fall short in their social credit will find themselves denied various facilities of the state.

In the 1970’s the Chinese government’s epochal decision for having an economic model of growth with free Economic Zones at its eastern coastal region along its ports, lead to not only large scale industrialization but also enhanced the imports and exports of the country. The financial initiatives and policy of ease of business facilitated China to slowly become the global hub of all major production units, irrespective of the nationality of their owners, who undertook huge financial investments. Such activities were simultaneously supported by the infrastructure capacity within the country. Likewise, the Chinese ports sector was examined in order to support the China’s economic growth aspirations. The first container port in China was only built in 1980 in the city of Tianjin, and within a generation, dozens of container terminals were built, so that today, six of the world’s ten largest container ports are located in China. Guangzhou, which in the mid-20th century was a small coastal city, became the third largest city in China, and one of the world’s most bustling ports.

As a dogma, the government also restored the socialistic concept whereby certain business ventures were kept under the strict government control. This was especially true, in case of those companies which were engaged in the infrastructure development in China. The government owned companies with time developed their capacity to undertake massive infrastructure development works at the shortest time frame, limiting the scope of any type of competition both at the national and the international level. With the construction of large-scale infrastructure projects across China, Chinese companies began to gain capital and acquire knowledge and skills in engineering. This growth, along with very generous financial assistance from the Chinese government, mainly with convenient loans to the Chinese Government Companies (SOE) (support based on huge foreign exchange balances due to long-term positive trade balance and incoming foreign investment), cheap cost structure (especially labour costs), as well as a lenient standard regulations, have made Chinese companies highly competitive in infrastructure construction compared to their competitors (US, European and Japanese companies). This really shortening the way for international breakthroughs, and the Chinese companies very soon began to undertake infrastructure and complex overseas engineering projects.

Thus, in 2007 when the world was facing huge financial crisis because of the economic slowdown, the Chinese state owned company in steel production and other infrastructure support industry were working in their optimum capacity. The much awaited economic bubble, which continued to keep China’s Gross Domestic Product (GDP) at about seven percent, did not bust (Garlick, 2016). However, the economy did slow down and the Chinese reasoned it to be the outcome of structural quality improvement of their production and manufacturing line for greater efficacy. Mainly, the Chinese international economic development relied (until recently) on a model of cheap production for export in large series while importing raw materials and energy. In other words, the huge development described above relied mainly on maritime trade in imports of raw materials and energy in which China lacks self-sustenance. Like for instance the Middle East crude oil, quarries (such as iron ore from Africa and Australia), and agricultural products from various countries around the world. At the same time, exports of finished products continued from China, from its factories on the eastern coast.

The steep economic rise in China has led to the prosperity of its people and the country is already the second largest economy of the world. Still, there are some very solemn concerns that face China. Much of the development activities got restricted for many years on the eastern coast of China. On the other hand, the central and especially the western region comprising of Xinjiang and the Tibet Autonomous region got neglected. Rather both these regions due to Chinese cupidity were mainly exploited for the natural resources (Svensson, 2012). A prolonged policy of Chinese communist government of alleged exploitation had led to huge unrest within these areas. The government is believed to have used unprecedented force to crush any uprise and nothing really got reported in the International media. However, the information creeping out of the country indicated towards gross violation of the human rights of the local minority population in these regions. China, to maintain its control over these areas increased its spending on internal security and the issue of enduring stability within its own western provinces became a greater cause of concern for the Communist government.

China also understood that its dogmatic policy in Xinjiang and Tibet will not hold them in good stealth and the economic conditions of the people in the region, which had been long ignored, had to be finally addressed. However, this task itself was not easy as the region of east and west in China is spread over a vast distance. Due to the economic advancement in the eastern region, all the assistance for the western region had to be sent from the east, which had the ports connecting linking it economically to various countries. Therefore, China took the initiative of linking its remote regions with the neighbouring countries so as their closer access to the sea could be fully explored for its own advantage (Ooi & Trinkle, 2015). This model of connectivity would also allow the Chinese to import huge amount of natural resources, especially the oil and natural gas, from these neighbouring countries which were quite unhampered (Kunaka, 2018). Much of these projects within a short duration brought huge amount of financial advantage to the Chinese, especially in countries with port connectivity. In addition, many of Chinese infrastructure building companies and manpower was optimally utilised for development of connectivity with these neighbouring nations. The early positive indicators of these projects prompted China to expand its reach globally to all those regions from where it could exploit natural resources and export its finished products. China has the infrastructure building capacity to well complement this requirement. Rather after extensive infrastructure development in its own eastern provinces, leading to emergence of ghost cities and further connection by lesser used multimodal transport, its government owned infrastructure companies were grossly underutilised. Thus, this concept of linking various nations by multimodal transport to generate economic advantage came as an economically diligent move. However, while examining the Chinese international infrastructure and construction activities, a clear distinction should be maintained between exporting services from China, which does not provide ownership of the infrastructure being built, and on the other hand the direct investments originating from China which include ownership of assets and infrastructure outside China.

 

Factors leading to the fast progress of BRI

China had to address the issue of financing the entire ambitious project. Here again, China had two distinct advantages. Firstly, there were huge financial reserves available to the country which was required to be further compounded through profitable investments. Thus, China took the initiative of opening the Asian Infrastructure Investment Bank (AIIB). The second advantage with China was the readily available clientele for its loan facility. Many of those countries which agreed to accept the Chinese proposition of development projects under the BRI initiative comprised of economically weaker nations. Some of these nations on their own accord would find it difficult to secure funding for their national development projects from any economically affluent country or by International institutions, like the World Bank. Therefore, many such nations with weak financial credibility took very generous funding through China for development of projects for connectivity. In a very short span of time, China engaged a large number of countries under BRI. In addition to the AIIB, China also transacted sufficient project funding through People’s Bank of China (PBOC), Chinese Development Bank (CDB), Export-Import Bank of China (EXIM), BRICS New Development Bank, Shanghai Corporation Organisation Development Bank, etc. Apart from country to country engagement, China also made optimal use of the regional organisations like the Great Mekong Sub-regional Cooperation (GMS), Asia Cooperation Dialogue (ACD), Central Asia Regional Economic Cooperation (CAREC), Asia-Pacific Economic Cooperation, and in some cases formed its own led organisations like China- Arab States Cooperation Forum, Shanghai Cooperation Organisation (SCO), Asia Europe Meeting (ASEM), China-Gulf Cooperation Council Strategic Dialogue, etc.

Today, within the Indian Ocean itself, there are commercial ports like Hambantota in Sri Lanka, Harao in Maldives, Chittagong in Bangladesh, Kyaoukpyu, Sittwe and Islas Coco in Myanmar, Sihanoukville in Combodia, Gwadar in Pakistan being operationally managed and even controlled by the Chinese under their Maritime Silk route initiative (Dabas, 2017). China over the years, has invested in nearly 42 commercial ports around 34 countries which are spread in various continents across the globe. Interestingly, Chinese policy of partnering with many of these nations, in contrast with the western ideology, is purely driven by the economic interests. This has opened those new markets for China, which were not even accessible to the west due to their own self imposed restrictions.

Although at the face value, the Chinese BRI may look very luring but the progress of the projects in actuals, forwards a very contrast circumstances in some of the cases. For instance, some of the states like Mongolia, Tajikistan, Laos and Pakistan, which had readily welcomed the Chinese projects are finding them beyond economic viability. Rather some of them have already lost their capacity to repay China and are in heavy debt. This has been the situation especially for port development which calls for large sale of support infrastructure besides the port facilities itself. For instance, Hambanthota port of Sri Lanka is a classic example falling in favour of the Chinese. As a bail out proposal, China is buying the rights to administer such assets through lease mechanisms. The Sri Lankan port for the next 99 years will be administered by the Chinese port companies and government authorities (Stacey, 2017; Hillman, 2018). Then there are some other countries like Malaysia, which have realised that they will be in no position to benefit from the Chinese initiative and wanted to recede from this initiative (Menon, 2018). China has renegotiated with such nations to avoid any abeyance of the deal. In spite the criticism of such overseas projects, China is consistently examining each of such contracts at the bilateral level. The objective is to customise the needs of the country joining the initiative and along with meeting its own larger interest (Parameswaran, 2019). Incidentally, not much information is available in terms of these deals in the open domain, which can be examined to establish an emerging pattern. Thus, the bilateral agreement that China may formulate with Myanmar may be very different, in terms of its mutually agreed conditions, than with Italy for instance. Therefore, the confidence of the nation dealing with China to safeguard its national interest and also finding issues of common interest becomes very vital factors. In addition, the public opinion within the nation engaging with China also becomes important to ensure that the project does not face mass protests and suffers from public resentment. With all such conditions being witnessed and interpreted in many nations, the world is quite divided whether the Chinese investments under the BRI are of advantage or not. Irrespective of this opinion, there is no denying that China each year is securing more and more international contracts of infrastructure development and soon it will be almost impossible for any other country to maintain parity. Quite understandably, the multi modal structures with China’s indulgence will allow easy access to all its BRI partners. This definitely will act as a huge incentive, especially to smaller nations to collaborate with China.

The first conference of the BRI was in 2015, in which 35 nations had participated. The second conference of BRI was held in China between 27-28 April 2019 in which 135 member nations participated and finalized fund allocation for projects and also revised few terms of engagement. As far as optics is concerned, quite axiomatically it did catch the world’s attention. One country which has openly expressed its reservations over the BRI initiatives and has kept itself out of BRI, expecting its allies to maintain similar stand, has been US. However, now many of US’s allies have decided to choose the course which is best for their own national interest and have collaborated with China for infrastructure projects in their respective countries. When the response of the nations is examined regarding a collective approach, many off the record reflect their apprehensions on the increasing Chinese investment both within their own country and also overseas. However, they don’t find enough reasons or alternatives to challenge the Chinese investments in any form which will place their country in open confrontation with China. Perhaps, the reaction is an outcome of the overall paradigm shift in the power centres of the world which clearly seems unavoidable.

 

Evaluation of BRI from Chinese Perspective

The BRI initiative from the initial stage was projected to be the ambitious plan of the Chinese premier President Xi Jinping, elevating his image as a great visionary, who understood not only the importance of economically strong China but also a country which was very strong as a leading global power. Xi Jinping’s predecessor Hu Jintao had followed the legacy of Deng Xiaoping, who believed that China must make a salient rise (Shirk, 2018). From 2012 when Xi Jinping came in power, this narrative was changed. It seemed that China was now ready and keen for a global role with geo-economic outreach. These aspirations were nothing new, rather were similar to patterns existing in history. During the protracted cold war era, both the super powers had developed their blocks of nations who vehemently supported all their policies at the international level. For this alliance, the super powers extended such allying nations with substantial economic support for sustenance. A majority of nations thus formed part of this power block system, while a few opted for the non-aligned model. With time the Soviet Union could not economically sustain this model, especially as it simultaneously contested US to increase the nuclear stock pile and advance the space program for greater domination. In 1991, the Soviet Union collapsed.

China with ideological alliance with the Soviets, till the 1960’s, soon realised the need to evolve their own model of governance or else they would face similar situation. Thus, in the late 1970’s , the Chinese economic liberalized for investments and the capitalist model was overlapped over the socialistic model (Shigeo & Jia & Junya, 1999). This was accepted both internally and externally with lot of enthusiasm, leading to Chinese rapid economic development (ICJM, 2013). The leadership to achieve unhindered economic empowerment advocated the philosophy of silent rise. The fifth generation of Chinese leadership, under Xi Jinping believed that now was the time for China to become more assertive and active at the global level (Hoo & Mingjiang & James, 2017). However, rather than imbibing the model of the previous super powers of granting large financial aid to its allies, which even after the disintegration of the Soviets, US followed, the Chinese came up with connectivity model under BRI. This initiative met multiple objectives. Firstly, through BRI it was being recognised as a global power without any blatant demonstration of its supremacy or military power. Secondly, China didn’t extend any grant without mutual gains and in case of bad debt; the model of asset control was incorporated in the bilateral agreement. Today, Chinese engagements under the BRI are spread across all the continents and they are being welcomed by various nations (Shah, 2018).

As a new trend, China acquires the land in conjunction with its overseas mega projects and also engages in agricultural activities, mainly to supply edible items to its large urbanising population. It mostly hires its own citizens as workers in all these economic engagements, thereby, exploiting the overseas natural resources and also selling their finished products in these new markets (Olander & van Staden, 2016). This circuit of Political-economics of access to raw material, means of transhipment through multimodal connectivity and new markets for end products, fulfils all the advantages of colonialism and cold war era without any risk to be considered an aggressor. This status of undisputed supremacy will make China an invincible power without any contention (China Power, 2017).

History stands testimony to the fact that strategic plan of International magnitude has to be best executed effectively to gauge its real success. Presently, the BRI seems to be heading in this direction for China. However, the question arises of its long term success. Being a communist state, where information is still behind iron curtain, the factual details relating to BRI are not accessible. The official version is not completely reliable. Thus, to comment with certainty about the overall economic health of China also becomes a challenge. Therefore, understandably, a sizeable number of economists around the world feel that Chinese economy may head for a slowdown. Many of the crucial parameters of growth assessment are well concealed and the Chinese nebulous growth figures are those released by the state. Under such circumstances, Chinese capacity to continue spending on its BRI project is not backed by sufficient transparent data. A number of host nations have also realised that the projects under BRI are difficult to be run independently by them, mainly due to lack of revenue generation capacity at present. China has been willingly acquiring operational rights over such projects through their loan waiver schemes. However, in the end it does not seem viable for China to maintain a strong economy through such frequent bail outs and simultaneously continue expanding its outreach to new partners (Yamada, 2018). There have been reports coming that at the politburo meeting in Mar 2019, the BRI project has been criticised and considered to be unsustainable by China in the long run. Irrespective of these speculations, there is no denying that if majority of the overseas investments fail under BRI it will not only create a major economic crisis for China but will have a global impact. Until this speculation does not become a reality; the Chinese success of BRI has to be accepted on the face value as being projected by China.

 

Criticality of BRI for various nations and the International world order

The Chinese investments under the BRI have been taken with lot of enthusiasm in many nations which lack the capacity for creating such infrastructure indigenously, that are crucial for growth and development. Rather, the proposal of having mega projects which promised self-sustenance and revenue generation were too luring to avoid. Such countries became the obvious partners of China with least resistance. As such, they had no alternative proposal to support their national aspiration. Then there is another category of nations, which are economically prosperous. Even these nations opted to be part of the BRI mainly due to the quality and cost effectiveness of the projects and also due to the traditional policy of openness for trade and investment, especially at the case of small and advanced nations. Above all, the Chinese capability of meeting the projects time lines is impressive. These countries also weighed the advantages of utilising such infrastructure globally under BRI, for their own economic outreach. The third category comprises of nations who are opponents of the Chinese initiatives and discourage their allies from bilateral collaboration with China. However, with time the US influence over such nations is reducing due to its parsimonious approach. China’s policy of economic engagement irrespective of other bilateral differences has drawn countries like the Philippines to collaborate with it.

If this near monopoly of China in terms of infrastructure development under BRI continues, then the business community will be dependent on Chinese multi-modal connectivity and will fail to assert independent decisions either collectively or as individual states. This model of Chinese hegemony is in contrast with the spirit of international organisations representing the power of collective decision making. However, times will not be far when these international organisations will lose their neutrality and importance. If such situation arises, than the entire concept of collective partnership in the world order, an idea mooted after the World War II, will be destroyed by adverse impact on mankind. Therefore, nations need to look beyond their immediate geopolitical interests and must view the world as highly interconnected, where actions in one region will impact the rest.

Here it becomes important to especially discuss in detail two nations which are quite different and unique in so many parameters from the other nations, who have wilfully perceived this Chinese economic outreach, however, with due caution to safeguard their individual national interests. Even when these two countries, India and Israel are geographically not collocated, still they have shown some level of commonality while engaging with the Chinese. First, both nations have prioritized their own core national interests and in accordance have reacted towards Chinese BRI initiative. Second, the public opinion in both the countries has a direct impact on the International policy of engagement placing reasonable check and balances over the policy formulators. Third, both nations are way too conscious about their sovereignty and independence which is not likely to be compromised while examining BRI. Four, the Chinese economic support in their respective countries will be one of the many multi-national collaborations and not the only recourse, as is the case with many other nations. Five, even when both India and Israel are engaging with China for economic cooperation, still they are not actual classical partners of the BRI initiative. Finally, both nations have majority of their trade activities linking with the outside world through the sea access.  With these commonalities in place it becomes important to examine the individual and collective perspective of both these countries, which is classically unique and important for understanding of the Chinese BRI impart across the globe.

 

Israel

Israel has indeed fascinated the progressive world with their resolve to emerge as a sovereign state, while it consistently faced numerous challenges at multiple fronts from the time of its independence. The holy land of the Jews warmly welcomed its people, who chose to revert back. Israel, even with the constraints of natural resources rose to be a self-sustained. The country focused on higher education of its people and gradually in the field of science and technology had pioneering achievements in the modern world. Today, Israel irrespective of its geographical size is leading the world in defence technology, space technology, electronic, etc. A large number of patents acclaimed by Israel quantify its incredible achievements.

Israel has a limited 197 Km access to the Mediterranean Sea on its western coast, which however still provides it the opportunity to connect by sea with the outer world for trade and business perspective. Over the years, the volumetric trade of the nation has increased to remarkable extent where higher capacity of port infrastructure became a necessity for the country. Israel realised that it had limited options of development of commercial ports in the country under the existing port management structure. For the new commercial port facility at Haifa (HaMifratz port) will be operated by world class technological provider (SIPG) for optimum utilisation. Here Israel realised that China was indeed well poised as a partner for ports operability. Today, China has taken over the construction work of the port at Ashdod (The HaDarom Port) and will be operating the HaMifratz port for 25 years. Thus, Israel has become one of the few developed nations which have collaborated with China for its infrastructure development for better connectivity. Even China finds its access in the Mediterranean region highly effective for furtherance of its BRI initiative (Abrams, 2018).

However, this collaboration equally raises serious concerns within Israel regarding the national security as this commercial port is in close proximity to Israel’s naval base. For instance, Shaul Chorev former  chief of staff of the Israel navy, head of the Israeli Nuclear committee and current director of the Research Center of Maritime Policy and Strategy at the University of Haifa has recommended creating mechanism that will examine Chinese investments in their country (Egoz, 2018; Brennan, 2018). Taking on with this advice, a panel of luminaries from diverse fields has already been created in Israel to advice the government on further foreign investments in the country in the critical sectors. Israel’s cautioned approach is also reflected by the mere fact that none of the present projects of China will provide them long term rights over the assets. In the context, projects such as mining of the Carmel tunnels in Haifa, construction of the southern port of Ashdod, and more recently the construction of some of the Tel Aviv subway lines can be mentioned. These projects are services exported from China and do not include investment, management or Chinese ownership of the projects and infrastructure facilities once the construction of these projects has been completed.

On the other hand, globally there has also been significant development in Chinese outward investments. As of 2003, the Chinese government’s restrictions on foreign currency were partially removed, paving the way for FDI from Chinese companies to the world. In 2019, as part of a wave of foreign investments by Chinese companies around the world, it has targeted various economic sectors and many countries. Chinese companies have also invested heavily in seaports and related infrastructure. In the Israeli context, the operation of the port of Haifa by SIPG and the acquisition of the Alon-Tavor power plant by MRC Group- can be mentioned as a Chinese investment for operability. This is in addition to very visible Chinese partnership investments in other companies such as Tnuva and Israeli high-tech companies.

In 2015, SIPG from China was announced as the winner in international bid for operating the new port in Haifa Israel, named: ‘Bay Port’. The Chinese company was the only competitor to operate the port, apparently due to the estimation of other players that with the constructing of another new port in the city of Asdod parallel to the construction of the Bay port, there will be over-capacity in ports facilities in the   Israeli economy, and therefore international companies have avoided bidding. A similar concern of surplus docks was also expressed by the Israeli Ministry of Finance in discussions with the Ministry of Transport about the new port. The Chinese have still chosen to invest in Haifa which is towards the northern side of the country, in contrast to the commercially advantageous Southern Port (in Ashdod) which is better located to serve the Israeli economy due to its proximity to the economic heart near ‘Dan’ region.

This choice of Bay port of Haifa over the South Port is likely related to broader aspects of China’s Belt and Road Initiative. One of the operational principles of this initiative, which is reflected in many projects around the world, is the principle of interconnectivity between the various infrastructures, and in particular between railways and ports. Possibly (haven’t confirmed by any Chinese official despite academic and journalistic writing on the matter), Haifa’s strategic location on the valley track (Izrael valley) offering possible gateway to the Mediterranean for Jordan, and possibly some of the Gulf States.

Indeed, the Middle East and Jordan regions are in the swing of developing transport infrastructure (mainly railroads), some of which are coordinated with the Chinese BRI (such as Jordan) and some without direct public coordination with China or Jordan (such as the Haifa – ‘Shaykh Hossein’ bridge railways as part of the Israeli Ministry of Transport’s ‘Railways for Peace’ program). Connecting the rail network in the region could make a land connection between the shores of Eilat (Aqaba) Bay (Jordan and Saudi Arabia) and the Mediterranean, as well as in the future a land connection between the Persian Gulf countries and the Mediterranean. Within this background, the initiative much postponed by Israel to connect the Eilat city with its rail network and further creation of another possible land route between the Red Sea and the Mediterranean may become a possibility due to Chinese indulgence.

The politics, historical and cultural contexts within the Middle East makes rapid advancements difficult towards cooperation and mutual economic gain for a common logistics system. Today, despite significant logistical and economic benefits, Haifa port is hardly used as ports of transport to Jordan. This is because of the Jordanian ‘street’ opposition to the consumption of goods passing through Israel, and preference of Jordanian to access the Mediterranean through Lebanon or Syria, especially after reopening the Jordan-Syria border crossing in 2018, despite geographical difficulties and political instability in these countries. In addition, Jordanian policy clearly defines that most of the trade in general and by containers in particular – will enter the kingdom through the port of Aqaba (the only maritime port in Jordan). This preference is presumably intended to preserve economic activity in the city of Aqaba, which is the political power centre of King Abdullah’s family, in addition to the overall regional security concerns.

Over the past 15 years, the Israeli economy and ports sector have matured, along with country’s political and economic influence in the global arena. These positive economic outcomes have inspired the state to involve private port partnership to mainly countercheck the monopoly of the labour unions under the present port management system. This competition between existing port management and the private port will hopefully optimise port operations and further save public money. In the absence of regulatory mechanism for screening foreign investments in the economy, the operation of new port moved from the Israeli government company, which was already involved in controversy due to poor management and union issues, to the Chinese state owned company. Ironically, there were very few international bidders to counter the Chinese proposal which apart from technical capability has the support of state reaching near global supremacy.

In the Israeli context, China usually expresses a distinctly pro-Arab, pro-Iran and anti-American stance at the international level, especially the United Nations (UN). This position is mainly due to the fact that China is heavily dependent on Middle Eastern oil, especially from Iran. Further it facilitates to structure its anti-American policy. For years, China has proposed a Middle East peace plan. However, the main construct of the plan involves actually safeguarding the Chinese interests in the region and getting the same formally accepted by all parties to the conflict. In 2017, China also released a four-point plan to settle the Israeli-Palestinian conflict, however with initial mentioned of its Belt and Road Initiative. Many of the business ventures between China and Israel have already raised America concerns. Most importantly at the strategic level, their sixth fleet will be constrained to access the naval base at Haifa, which has the Chinese within close proximity (Nahmias, 2019; Huang, 2018). All the investments under the BRI provide China access to various regions thereby ensuring their strategic relevance and safeguarding their national interests. Thus, the Israel-China engagement under BRI becomes important and requires continuous examination as this region is still not of direct strategic interest to China (Efron & others, 2019; pp 83-84).

 

India

India thus far has been quite cautious of the BRI initiative of China and has over the years reflected its foremost concerns quite explicitly in various bilateral engagements between the two countries at various levels. The China Pakistan Economic Corridor (CPEC) which passes through the Pakistan occupied territory of Jammu and Kashmir violates the sovereignty and territorial integrity of India and has been opposed by India right from the conceptual stage itself. The Prime Minister of India, Narendra Modi during the G-20 summit in 2018 had yet again expressed India’s concern regarding the CPEC to his counterpart Xi Jinping and urged both countries to be “sensitive” to each other’s strategic interests. However, China insists that the project must be viewed from the economic prospective and not as a “sovereignty” issue. China’s proposal to rename the CPEC project has not impressed the Indian establishment to join the BRI. On its part, China continues to push forward the idea of India joining the BRI initiative to not only get access through India but also look for being stakeholder within the increasing Indian market.

In addition to the CPEC related concern of India, it is equally not comfortable with the large scale of infrastructure investment by China in India’s neighbourhood, especially in the littoral states. China has invested in the past decade nearly $150 billion in the economies of Bangladesh, Maldives, Myanmar, Pakistan, Sri Lanka and Nepal. In some of these countries the state politics is also being influence by China. In 2015, Maldives amended their constitution permitting foreigners to purchase land, facilitating Chinese company to secure the Feydhoo Finholu Island on a long term lease. Two years later, a free trade agreement with China was passed in the Maldives parliament without any major opposition. In Pakistan, a majority of the Chinese investment has been in the power sector which in few years will place the nation under further debt for lack of repaying capacity. Much of the contract signed between China and Pakistan indicate that the host nation maybe providing agriculture product supply to China to counter it food security in the near future. Bangladesh which economically performed well in comparison to other nations in India’s neighbourhood mainly looks forward for Chinese investment for improving the poor state of connectivity in the country. So far, the country has been able to strike a balance in its relations with both India and China, ensuring to meet its own national interests. Still it will be a challenge for them not to completely fall for Chinese engagement in the infrastructure development projects. As far as Sri Lanka is concerned, its Hambantota port got them into huge debt and finally has to hand over the port for 99 years lease to China. In addition to this, China is also investing in the development of port city of Colombo and the Lakavijaya thermal power plant. The direct concern for India is that it depends on Colombo port for 30 percent of its container traffic which will soon have 85 percent of the Chinese investment in facility development. This may have adverse impact on India’s foreign trade.

For all these years, India had been looked up for assistance by these countries, who now see China as an alternative not only as an alternative but also as a caveat for better bargaining with India. This approach of counter-balancing its influence has not gone too well with the Indian establishment which feels that China, if not a direct threat still poses to be a potential risk to its long-term regional strategy. Thus, India has undertaken two initiatives of its own to ensure that the Chinese BRI initiative does not adversely impact its own national interest. In this regard, India has undertaken at various bilateral level outreach initiatives with its immediate neighbours. Here the land locked partners who are geographically still dependent on India for access to the outside world have been more forthcoming to reciprocate to India’s initiatives. For instance, China had to scrap the hydro-electricity project in Nepal as it refused to purchase the electric supply and so the project lost its viability for China which could neither sell the surplus supply nor use it for its own purpose. The other nations which have access to the sea are equally weighing their options very carefully. Thus, the counter to BRI initiative by India has brought the focus to the Maritime domain and is very critical for India’s future posturing within the region.

In Maritime domain India has proposed Security and Growth for all in the Region (SAGAR) for partnership with all nations in the Indian Ocean. Project MAUSUM another initiative has been launched by the ministry of culture through which it wishes to collaborate with other nations within its region for cultural routes, maritime landscaping and the monsoon pattern effecting all collectively. Thus, the main focus is on enhancement of the economic opportunity for the people within the region by sustainable development. Under initiatives to work together with its neighbours, India spent 1300 crores for the “housing project” of the Tamil displaced during the civil war in Sri Lanka. In addition, $1.3 billion line of credit has been extended to Sri Lanka by India for the development of its railways. To Bhutan, India provides financial aid of Rs 2500 crores in the financial year 2019-20. India also spend huge amount of financial resources for improvement of health and education sectors in Maldives over the past few years. On similar lines to build institutional and physical capacity in Myanmar, India gave grant assistance of Rs 400 crores in 2019-20 and additional line of credit for undertaking various development activities. Likewise, India has also engaged in nearly all its neighbouring states under its “neighbour first policy”.

This approach of India, in contrast to China, is not seen as part of aggressive mechanisms to fulfil its own individual objectives alone and thus has been well received by its partners. At the national level, India has launched SAGARMALA project through which it intends to provide a boost to its port and coastal region development for a larger blue economy. Through these initiatives under the larger regional picture, India looks towards becoming a reliable trading partner for many of its neighbours, ensuring development for all.

In the past few years, some of the littoral states in the Indian Ocean Region (IOR) have either stalled or slowed down their BRI infrastructure development projects and have given precedence to Indian investment in similar area. In addition to its closer proximity with nations in the India Ocean, India has also been successful to bilaterally engage with few of the countries in the South China Sea. The India Navy has also commendably ensured that  its regional presence in International waters become frequent and impactful to register India’s presence with the region of Indian Ocean and the South China Sea.

The second important initiative by India has been to now openly support the freedom of navigation at the International waters. In various international forums, India has spoken off late regarding freedom of navigation especially in the South China Sea. Chinese much due to these developments from the Indian side has been quite cautious and is consistently monitoring the presumed India alternative strategy. Third, the multinational collaboration of the region keenly welcomes India’s involvement which at times is taken to be a threat by China. India has till now maintained caution and had dissuaded for overtly aligned with any regional organisation wherein it is seen as a partner without its own free and independent perspective over the regional concerns. Even when India safeguards its own national interest from the rapid investment activities of China within the region, it still understands the importance of constructive engagement with China. Rather, if the bilateral relations between both the countries are examined in detail, a clear progress of substantive level has been mutually achieved by both nations. Today, there are more economic engagements between both the countries and many more coordinated initiatives are being undertaken in various public and private sectors of both countries.

As far as the Chinese initiated Asian Infrastructure Development Bank is concerned, India is one of the significant contributors for the same and over the past few years has also become the largest recipient of the loan facility extended under this framework. All these development from the Indian side primarily make some remarkable imprints at both the regional and the global level. First, India will continue to work in close coordination with its neighbour and its “neighbour’s first policy” has been followed quite regressively. Second, India will not compromise on its independent outlook towards all International issues of significance. The nations dealing with it will have to respect this framework which derives strengthen from the resolve of its people. Third, India optimistically looks forward for engagements with China provided that there is transparency, openness and rule of law being adhered at all levels.

As far as India’s direct engagement in the BRI engagement is concerned, till the time India’s concern in regard to BRI and its issues of transparency are addressed, it does not seem to be keen on this partnership.

 

BRI Global Impact

Due to the uniqueness of Israel and India which cannot be classified as weak economies, their BRI perspectives  become very important to be understood in great detail. Apart from these two nations there are 152 countries which as of today are part of the BRI initiative and engaging with China for infrastructure development in their respective nations (Belt & Road News, 2019). The Asian Infrastructure Investment Bank (AIIB) pioneered by the Chinese has given irresistible offer of loans to nations. Today, even Russia is quite open to receive the funding under the AIIB and is also willing to allow Chinese mega connectivity projects pass through their region to link Asia to Europe. China has expanded its reach to many far off countries which do not have direct geopolitical relevance to it presently. This is a clear indicator of their willingness of global outreach, especially through mega infrastructure projects under the BRI initiative.

 

Implication of BRI on China and the World

In a very short timeframe, China has made impressive progress under the BRI initiative. Within China, a subtle conditioning of the Chinese people is being undertaken to highlight the achievements of the BRI, crediting the political foresightedness of President Xi Jinping to further consolidate his position as an indispensable statesman (Saran, 2018; Hui, 2019). However, the economic commitment for the BRI seems to be overstretching China. The indicator of the same was the issues raised in the politburo where need for mid-course reassessment of the entire initiative was highlighted. Although, much of the Chinese public and private infrastructure developing partnerships are being optimally utilised in the overseas projects. However, the returns are slow and at places its will be years before the ventures turn profitable. Here it is important to acknowledge the fact that the objectives of investments in such great magnitude are not only financial but also to create a dominating influence as a major world power. Nevertheless, there are high risks involved to draw a perfect balance in this regard, failing which could lead to irrevocable losses to China. The Chinese actual capacity to indulge vigorously in BRI projects with consistency is something which needs to be closely monitored.

China also faces another unique challenge in its overseas project which is not of critical importance within its own sovereign state. Many of the Chinese infrastructure projects abroad are consistently facing huge public criticism where it is felt that China in its surge for economic development and powerful posturing may harm the local interests of the nation in which it is making investments (Olander & van Staden, 2016). China’s bailout proposal for extending the lease of assets for their own use has not been taken too well in many parts of the world. Rather the public sentiments have forced some of the governments to refuse Chinese investments in their country (Chellaney, 2018; “The perils of China’s ‘debt-trap diplomacy’,” 2018). Presently, China seems to be quite ill prepared to meet this challenge as its development narrative is inadequate to face such crisis. The next issue attached with the BRI is the recurring cost of investment for upkeep of all assets. This is a call for realistic agreements between the contracting parties to ensure that the long-term sustenance of the projects is maintained without compromising in quality.

Under overall International perspective, the nations have a divide in their opinion regarding the BRI. Many of those who have readily partnered with China in this are those nations who are well aware about their limitation. Neither do they have the ability to fund them nor the capacity to technically undertake these projects. In addition, they also do not have many alternatives (Bavier, 2018). Due to their political instability many of the international funding stands denied. Further the risk involved to undertake work in an area with actual security concerns, mostly dissuades the engagement of private players. China due to their strong political backing could easily access these countries. The other category of nations includes those who feel that they must optimally explore the opportunity for their national interest and even engage with China, who offers them quality assurance with very competitive pricing, which seems to be a strong point of mutual engagement. Lastly, there are those countries which at present have not aligned with China to form part of the BRI initiative but are closely monitoring all their activities. The future course they set for themselves in terms of their involvement with China will be critical for China to achieve uncontested presence around the world.

The key concerns that naturally get highlighted in case of the BRI are that its success leaves no place of actual alternatives. In such circumstances, in the future one nation will virtually monopolised the international forum. History stands testimony to the fact that this hegemony model is not in the interest of the world peace with its imbalance of power.

 

Recommendations for a balanced approach

Today is the time when the nations beyond their geographical interest must ensure a balanced approach. During the cold war the red lines were well defined between the Soviet Union and the United States of America and suitably both the super powers utilised their resources to counter the threat arising from the other. In present times, the Chinese activities are seen not only with suspicion but are equally seen as a threat by many nations. This assessment maybe wrong or may prove to be correct in the near future. However, the greater cause of concern is the fact that very little is being done to address the issue, either at the independent level or at a unified level by the nations, to ensure that the Chinese BRI concept does not prove to be detrimental for their own peace and prosperity. There is no denying that in the coming years China will have incessant rise to become an important power and there is nothing wrong with the efforts the nation is applying to achieve this aspiration. However, this rise of China cannot be and should not be at the cost of others.

In this regard following actions are recommended to be followed at the International level. Firstly, the international financial institutes created post-world war II to ensure assistance for development activities need to be again realigned. Over the years, the economic needs of many such poor nations have been ignored under the garb of unacceptable governance. This has led to virtual isolation of some of the states who had slowly provided access to China without drawing out a transparent economic deal for the actual betterment of their respective states. The present approach of international financial institutions needs amendment. This realigned financial alternative will also push China towards more transparency in its dealings.

Secondly, international dialogue on continued basis at various lateral levels amongst all nations, including China, to study the impact of the BRI must be undertaken. This will help to identify the fault lines. If China does not have malign intent and is genuine to become a true global power, then actual concerns related to environmental issues, workforce exploitation, development, debt trap, etc. attached with BRI, will get duly addressed by building up common consensus.  Thirdly, Chinese overseas infrastructure development activities under the BRI initiative have provided China access to substantial data and information of the region, its people and their activities, which can be exploited unabashed if left unchecked. The world needs to secure all such threats arising due to data sharing. China needs to transparently engage in this regard and it must be ensured that its actions do not weaken the existing mechanisms in various regions and nations. Lastly, there is need to see alternatives other than the BRI.

Individual nations will find it near impossible to attain China’s acceptance to these recommendations but the same can well be achieved as an international community. Therefore, the world must stand together as one in this regard. However, here it is important to reiterate that fact that China will have an increasing international involvement which is near inevitable, but then, rather than being fearful, the need is to maintain caution. This will provide the world a balanced alternative. The onus in this regard is more of the developed nations who have been active to ensure an acceptable world order, then those nations who may become victims of the dream merchandizing being aggressively undertaken by China.

Therefore, here it is also important to draw out recommendation from Israeli and Indian perspective in regard to the Chinese investment under BRI. This will also highlight the fact that the nations with better negotiating power must have mythology for hard bargain with China. As far as Israel is concern, there are primarily three recommendations. First, it is important to identify the strategic new partners in the privatization of the old Haifa Port Company. Presently, the Haifa Port Company which is directly responsible for the old port management faces privatization with the involvement of Chinese company as a strategic partner. In general, this step is financially positive and constitutes another pillar of the competition that is taking place in Israeli ports. However, in order to avoid a situation where there are players with shared interests within the ports – a situation that would hurt competition – the introduction of a strategic partner already active in Israeli ports should be re-examined by the state. In other words, the future strategic partners should not be related to players already active in the Israeli ports market, such as china’s players. Second, the State of Israel must build a legal mechanism requiring the regulators to report, if not acquire a formal approval per se, on foreign investments entering Israel in specified sectors with permissible investment amount specified. Such a mechanism would allow an informal channel between the governments and the investing company to discuss the terms of the investment, as well as act to curb the regulator’s informal activity to access unwanted investments, as already experienced in the case with CIL’s bid. In the Israeli context which due to its geographical constraints dependent on trade and international investments, such an informal mechanism will be preferable even to an official foreign investment approval mechanism of CFIUS in United States of America. Third, there must be frequent conduct of training for the senior officials on “Soft Power” aspects so as they are better equipped to engage with foreign investors. Given the latest trends of the resumption of the geo-political struggle between the superpowers, and what appears to be the growth of a new international order, once again the training to the senior officials in the public sector regarding soft-power issues is strongly recommended.

As far as India is concerned, it must continue with its approach of due caution towards the Chinese. There must not be any compromise on the issue of Chinese engagement in Pakistan occupied Kashmir, which challenges India’s sovereignty. In addition, India must also ensure that Chinese engagement within the IOR region must not exploit its neighbour leading internal financial crisis within the region. Finally, India needs to demand more transparency of action and freedom of navigation within the region.

 

Conclusion

The BRI initiative of China is a grand strategy which promotes capitalistic and zliberalized uniformity across the world, which a few decades back would have seen as unimaginable, especially being spearheaded by a communist state. However, there are serious concerns with this narrative as in some places the actual facts seem to be in contrast to the promised future. Somewhere, the mixed results of Chinese BRI have created a debate, wherein it still needs to be established whether the Chinese development model is with merits or has hidden national interests, detrimental to those who may collaborate with it. Therefore, the paper examined the BRI as it is propagated by the China and on the other the way it can alternatively be perceived by the other nations, with special emphasis to India and Israel. There is a realisation that the Chinese influence around the world will raise especially as they have the monetary resources, technological capacity and a very strong political will. However, nations must choose wisely. Under no circumstances the world must be subjected to a condition where there are no alternatives available. The hegemony so created will prove to be retrogressive for the world peace and harmony. Therefore, rather than being apprehensive of the Chinese BRI initiative, there is a need to closely and consistently monitor its development and ensure that its terms of engagement do not become exploitative for those nations which are getting drawn towards a collaboration in this regard. On the other hand the world must also not miss upon the opportunities which are likely to come in way due to the BRI initiative. Thus, a fine balances of inclusive growth for all without undue exploitation of one nation over the other needs to be followed for the actual success of the BRI.

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About the Authors:

Lieutenant Colonel (Dr.) Mohit Nayal is a former Research Fellow at the National Maritime Foundation, India.

Mr Ehud Gonen is a Research Fellow (PhD Student) at the Maritime Policy and Strategy Research Center, Asian Study Department University of Haifa, Israel.

Mr Rana Divyank Chaudhary is a former Associate Fellow at the National Maritime Foundation, India.

 

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