In the twenty-first century, infrastructure development has become the new pivot of geopolitics. Power and influence is no longer measured by the military prowess or economic size alone, but also the ability of international actors to provide the necessary capital and technology for overhauling decaying or underdeveloped public infrastructure around the world. Asia’s leading economies have all pitched in, ranging from Japan’s Connectivity Initiative and Partnership for Quality Infrastructure projects, to South Korea introducing the “New Northern” and “New Southern” Policies, and India’s International North–South Transport Corridor. The biggest of all, however, is China’s infrastructure plan.

On May 14, 2017, Beijing launched the Belt and Road Initiative (BRI), previously known as One Road, One Belt (OBOR) project. During the summit of global leaders, President Xi Jinping opened up the mega-event as the keynote speaker before leaders from as many as twenty-eight nations, who were more than eager to tap into Chinese infrastructure development largesse. “We have no intention to form a small group detrimental to stability,” the Chinese leader said during his keynote speech. “What we hope to create is a big family of harmonious co-existence.”

At its very core, the event served as the chief register for China’s new role in the international economic system and, more personally, Xi’s emergence as a global leader. And the timing couldn’t be any more perfect, given America’s abrupt withdrawal from its historical role as the anchor of the global free trade regime. Through the BRI, which Xi has dubbed as “the project of the century,” not only does China reiterate its commitment to globalization, but it will also be in the prime position to shapes the post–American international economic order.

Empire by Other Means

The year 2013 will likely be remembered as the beginning of modern China’s full-fledged bid for global primacy. It marked the rise of a new Chinese paramount leader, Xi Jinping, who, within a matter of months, managed to secure his grip on the three pillars of the Middle Kingdom’s political system: presidency of the state, the office of the secretary-general of the Chinese Communist Party (CCP), and the head of the Central Military Commission (CMC).

In October of that year, the Chinese president led a high-profile “Peripheral Diplomacy Work Conference,” the first of its kind since the founding of the modern Chinese state, where Xi emphasized the “extremely significant strategic value” Beijing attaches to its relations with neighboring countries. The Chinese leader underscored his country’s commitment to “encourage and participate in the process of regional economic integration, speed up the process of building up infrastructure and connectivity.” And it was here, where he first talked about China’s role in “build[ing] the Silk Road Economic Belt and twenty-first century Maritime Silk Road, creating a new regional economic order” with Chinese characteristics.

Over the coming decade, China is expected to invest up to $5 trillion in transcontinental infrastructure projects, which will connect the country’s industrial heartland to the world’s largest consumer markets in Western Europe. The mega-project is slated to cover as many as sixty-four nations across four continents (Asia, Australia, Africa and Europe), accounting for 62 percent of the world’s population and about a third of the global Gross Domestic Product. China’s policy banks, namely the China Development Bank, Export-Import Bank of China, The Industrial and Commercial Bank of China, are set to play a central role in funding the ambitious transcontinental infrastructure initiative.

More than anything, the BRI project is a reflection of Xi’s cult of personality, namely his self-projection as the harbinger of a new era of Chinese global dominance, the so-called “Chinese dream.” During the 19th Chinese Communist Party National Congress at the Great Hall of the People in central Beijing, Xi unveiled a two-stage national development plan. From 2020 to 2015, China will forge ahead with two fifteen-year development plans. The first one aims to turn China into a “moderately prosperous society” in 2035.

By the middle of the century (2049), marking the centennial anniversary of the founding of the People’s Republic of China (PRC), China aims to become a “great modern socialist country.” With Xi firmly establishing a one-man rule, removing any term limits on his presidency and eliminating all real and perceived rivals, he could very well stay in power until the fruition of this grand strategy of Middle Kingdom “national rejuvenation.”

Chinese Statecraft

Strategically, the BRI serves both economic and geopolitical ends. First, it allows China to fulfill its internal economic rebalancing on four fronts. This is achieved through (i) facilitating China’s long-term plans of developing landlocked hinterlands and underdeveloped regions of the West, where ethnic minorities are demographically dominant and widespread socio-economic discontent runs high. In national economic rankings, the western, landlocked provinces Tibet, Xinjiang, Qinghai and Gansu have consistently ranked well below the national average. This is where the “belt,” or land-based aspect of the BRI, comes into picture, connecting provinces such as Xinjiang to Pakistan, Central Asia and the Middle East via massive infrastructure projects.

The BRI allows China to (ii) outsource internal productive glut and infrastructure overcapacity, largely thanks to the massive U.S. $586 billion stimulus program and liquidity expansion (to $10 trillion) in the aftermath of the Global Financial Crisis that saved growth at the expense of sustainability. Moreover, the BRI projects are expected to help (iii) promote and assist State-Owned Enterprises (SOEs), which employ tens of millions of workers, through provision of lucrative projects overseas. The transport equipment market across the BRI-covered regions is close to $263 billion in 2018 alone.  Lastly, China aims to reverse the stagnation in global trade, which began in 2016, by (iv) improving trading partners’ basic infrastructure, China accordingly expands their ability for conducting larger trade.

Second, the BRI provides China geopolitical influence on three fronts, namely through (i) gaining foothold across strategically located “string of pearls” nations, namely Seychelles, Chittagong (Bangladesh) in the east to Hambantota (Sri Lanka) and Gwadar (Pakistan) in the West across the Indo-Pacific realm; (ii) Locking in rare commodities key to Chinese long-term development in resource-rich Southeast Asia, West Asia and Central Asia; and (iii) Globalizing Chinese technological and industrial standards across emerging markets. Under the Internet Plus and Made in China 2025 strategy, the Asian powerhouse aims to become technologically self-sufficient as well as a global leader in cutting-edge industries. Quantitatively, China aims to raise domestic content of core components and materials from 40 percent by 2020 to 70 percent by 2025.

The Chinese Chimera

Between 2000 and 2014, China invested up to $350 billion around the world, a staggering number that is expected to exponentially increase under the BRI strategy. Some put the final BRI tag price as high as $8 trillion. Between 2013 to mid-2017, about fifty major Chinese SOEs were involved in about 1,700 BRI-related projects.

Despite the lofty pronouncements and pledges, however, BRI investments may not be as large and consequential in the long run. As an authoritative study by the Center for Global Development put it: “Over a 20-year span, an $8 trillion investment program for BRI countries would amount to less than 1.5 percent of GDP per annum. . . . These levels are modest in comparison to the [Asian Development Banks’s] estimated infrastructure financing ‘needs’ in Asia, which are projected to be 5.1 percent of the region’s GDP.”

Yet, perils and risks abound. First and foremost, there are no comprehensive data on BRI-related projects and policy banks’ precise involvement. Crucially, China isn’t a member of the Paris Club, the world’s grouping of creditor nations, thus it doesn’t abide by internationally acceptable standards of debt-relief. Second, China tends to extract high interest rates, which are closer to market rate, often up to ten times larger than comparable foreign financed deals. And this brings us to the third concern, which is that China tends to drive hard bargain when beneficiaries offer, implicitly or explicitly, sovereign guarantees.

China has pushed for onerous debt-settlement arrangements, including 80:20 debt-to-equity ratios, with financing ratios ranging from 75:25 to 80:20 (with Beijing in clear command position), when host nations fail to cover debt-servicing costs. In 2011, Tajikistan conceded 1,158 square kilometers of disputed territory with China in exchange for debt relief. But the fears of “debt trap” by beneficiary countries are overblown, confined mostly to smaller economies with weak credit ratings such as Tajikistan, Lao People’s Democratic Republic (Laos), Kyrgyz Republic (Kyrgyzstan), Mongolia Maldives, Montenegro, and Pakistan. There should be less concern in bigger and more diversified economies with robust sovereign credit ratings such as Indonesia, Thailand and the Philippines.

Fourth, China could use the BRI to facilitate the penetration of strategic sectors— telecommunications, electricity and ports—among beneficiary countries. In the long run, this could have deleterious national security implications, especially in Western-allied nations. And finally, as bitter experiences in places such as the Philippines show, Chinese investments in developing countries tend to be facilitated by shady middlemen, corrupt officials, black-listed companies, and, often, in absence of strong institutional checks and balances. The result, especially in weak states and fledgling democracies, is the empowerment of autocrats and populists, which monopolize gains from Chinese capital, and, more broadly, political capture and cooptation of key members of the political elite.