Article by Hiep Nguyen,
China considerably ramped up its trade investments throughout Eurasia, Africa, and South America during the four years in which the Trump Administration scaled back the United States’s global presence. As the US withdrew from multilateral trade pacts such as the Trans-Pacific Partnership (TPP) and sought to slash foreign aid and investment, China accelerated its global economic presence under the Belt and Road Initiative spearheaded by Chinese President Xi Jinping. The ongoing plan involves massive infrastructure, telecommunications, and capital investment into smaller Asian, African, and European countries. It largely filled the void of previous Western-backed multilateral trade agreements such as the failed TPP. These efforts increased the flow of goods and money into China and also served as a bold effort to re-center global trade around Beijing. Within its Belt and Road trade relationships, China’s investments and offer of billions of dollars in subsidies to under-resourced nations enabled the state to write lax labor, environmental, and conservation stipulations that favored their companies. The loose standards often flouted tougher rules that the US and its allies previously sought from foreign investment and trade deals.
Although China’s investments have boosted the incomes and infrastructures of many of the countries it has invested in, Beijing is now facing headwinds and extensive pushback for its laissez-faire trade approach. Multiple countries have accused China of using Belt and Road to conduct territorial incursion, violate labor and environmental rights, and broker one-sided agreements that shortchange participants.
With a new US administration moving rapidly to re-invigorate its values-based multilateral trade relationships and undo four years of isolationist policies that created the void that Belt and Road filled, Beijing may have to fundamentally alter its approach to keep the trade renaissance going.
Transportation Infrastructure in Asia
China’s plan to place itself at the center of the global economy began with more closely interconnecting its neighbors in Asia with major Chinese cities. China spent $400 million sponsoring 253km worth of high-speed rail links connecting rural Thailand and Laos to the Kunming rail depot in Southwest China, among other rail projects in Tibet and Xinjiang. The investments have also continued past East Asia. In Central Asia, Xi laid the groundwork for a Trans-Himalayan Economic Corridor. The plan involved building new smart-lane highways in Tibet and developing Tibetan border towns to serve as Chinese trading entrepots with neighboring Nepal and India. Beijing also built roads that allowed Nepal to receive goods without using Indian infrastructure. These transportation efforts, which operate mostly using Chinese rolling stock and signaling equipment, not only funnel millions of dollars back to Chinese construction companies, but would also more tightly interweave Asian freight and passenger networks around China. The investments promote China as an attractive destination for imports and exports with its regional trading partners.
While Beijing claims that these investments have the added benefits of greatly reducing travel time and cost of goods for local populations, multiple countries have been incredibly uneasy about an increased Chinese economic and political presence in their backyards. Malaysia and Singapore have nixed investments in train segments that would have rapidly reduced travel time to 90 minutes between Kuala Lumpur and Singapore, citing crippling debt obligations and cost overruns that would mostly go to Chinese companies instead of local citizens. India and Bhutan have also argued that the construction of Chinese roads and establishment of entrepots along their borders–especially the presence of vacant Chinese military establishments in the Doklam Plateau–amount to brazen territory grabs that are difficult to reverse.
Natural Resources and Manufacturing in Africa
In addition to improving road and train infrastructure in Asia, China has also made an extensive play for natural resource and manufacturing supply chains in Africa. It has funded hydropower plants in Angola and Guinea, bankrolled the construction of state oil refineries in Nigeria, and heavily invested in leather factories in Ethiopia. The Chinese have also funded the training of thousands of garment and manufacturing workers in Kenya and Tanzania. These manufacturing initiatives—90 percent of which are privately bankrolled by Chinese firms—increase trading connections and money flow between China and African countries. They also greatly expand Chinese political influence over decision-making by African states, who are often met with lopsided Chinese leverage as China provides almost all the funding and earns interest on debt used for these projects. These circumstances often enable China to write labor, environmental, and conservation terms in its favor.
While China argues that its efforts have resulted in more resilient infrastructure, income levels, and institutions, skeptics of increased Chinese investments have accused Beijing of shortchanging the environment and workers. They cite allegations that Chinese companies illegally exported rosewood and zebu cattle and poached rare wildlife in Zambia and Mozambique. Although Chinese companies have increased skilled labor training for African workers, they have also stymied the formation of unions, enforced unjustly long working hours, and refused to increase safety procedures in factories.
Exports in Europe
At the western end of China’s Belt and Road network, Beijing has markedly increased its exports to European Union countries. In fact, China is now the EU’s leading investment partner as of 2021, overtaking the US. EU imports from China grew by nearly 2.2% last year alone. Chinese companies now distribute cars, phones, medical equipment, and green energy inverters throughout Belt and Road. Chinese financial firms have also gained a foothold in Europe as stores now accept Chinese payment methods such as AliPay and WeChat to accommodate the surge of Chinese tourists to the EU. Moreover, Beijing-based groups have swept in to invest throughout Southern Europe where the Eurozone debt crisis has hit countries the hardest. As a result, Chinese companies now own Italian tiremaker Pirelli and have a 67% stake in Piraeus (a major Greek port).
However, increased Chinese presence in the European bloc has not been without criticism. EU regulators have accused China of asymmetrical market access by restricting European companies from accessing their domestic markets and simultaneously taking advantage of free markets in other countries. Curtailing this imbalance was a major focus of the 2021 EU-China Trade Agreement as populist and nationalist parties often cite the disparity to rile up their bases and destabilize European unity.
Belt and Road’s Uncertain Future
While the Belt and Road Initiative flourished in reduced US presence during the isolationism and nationalism of the Trump years, President Xi’s outlook for centering global trade around China will meet a more robust challenge from the Biden administration. President Biden, unlike his predecessor, stands in favor of an expanded US presence in global affairs and trade. He has expressed interest in renegotiating and re-entering the Trans-Pacific Partnership with dozens of other Pacific Rim nations to provide a more equitable alternative to Belt and Road that distributes money more evenly among participant countries. A new Trans-Pacific Partnership that includes the United States would vastly increase enforcement of progressive rules on free and open Internet access, consumer protection, and the environment throughout the Asia Pacific. Combined with a renewed American commitment to protect the self-determination of smaller countries, a new TPP would directly counter China’s proliferation of rules that favor lax regulations, territorial incursions, and greater state control over information access.
However, this kind of expansive partnership would have to be negotiated, signed, and ratified by roughly a dozen different states. It would have to pass muster in the United States Congress to be officially entered as a treaty, where left and right-wing populists wary of any multinational trade deals will be quick to assail the agreement, as they did repeatedly in 2016. And even then, while the progressive rules of such an agreement would set the standards of engagement for all of its highly influential members, it would fall far short of becoming customary international law. This is due to the smaller size of the trade deal, whereas China’s massive Belt and Road network spans nearly 140 countries (although it should be noted that the extent of each member’s bilateral engagement with China varies greatly).
President Biden has also moved to revitalize trans-Atlantic ties at the recent Munich Security Conference and has successfully convinced many European countries to block Chinese-made 5G infrastructure, citing the technology as vulnerable to hacking and surveillance by Beijing. The recent selection of Samantha Power, former US Ambassador to the UN, as USAID Director signifies the new administration’s commitment to providing alternatives to Belt and Road that provide stronger protections for labor, the environment, and wildlife.
China’s Belt and Road Initiative has forever altered the nature of multilateral trade in Asia. However, due to opposition from countries over territory grabs, lax rules on environmental and labor rights, and the one-sided nature of trading relationships, Beijing may need to make some systemic changes if Belt and Road is to continue its success.
Author
Hiep Nguyen is a first year at Berkeley Law who is interested in regulatory and comparative law. Hiep received his undergraduate degree from Cal (Go Bears!). Before law school, Hiep worked for a public health agency and a political campaign.