Belt and Road Initiative ( BRI ) as an Energy corridor
Announced in 2013, the Belt and Road Initiative (BRI, also known as One Belt, One Road) aims to strengthen China’s connectivity with the world. It combines new and old projects, covers an expansive geographic scope, and includes efforts to strengthen hard infrastructure, soft infrastructure, and cultural ties.
Supporting a diverse array of initiatives that enhance connectivity throughout Eurasia and beyond could serve to strengthen China’s economic and security interests while bolstering overseas development. At the first Belt and Road Forum in Beijing in May 2017, President Xi Jinping noted that, “In pursuing the Belt and Road Initiative, we should focus on the fundamental issue of development, release the growth potential of various countries and achieve economic integration and interconnected development and deliver benefits to all.”
The BRI is an umbrella initiative spanning a multitude of projects designed to promote the flow of goods, investment, and people. The new connections fostered by the BRI could reconfigure relationships, reroute economic activity, and shift power within and between states. In March 2015, the Ministry of Foreign Affairs disseminated an action plan (issued by the National Development and Reform Commission) that fleshed out specific policy goals of the BRI. These included:
- Improving intergovernmental communication to better align high-level government policies like economic development strategies and plans for regional cooperation.
- Strengthening the coordination of infrastructure plans to better connect hard infrastructure networks like transportation systems and power grids.
- Encouraging the development of soft infrastructure such as the signing of trade deals, aligning of regulatory standards, and improving financial integration.
- Bolstering people-to-people connections by cultivating student, expert, and cultural exchanges and tourism.
Beneficiary countries are likely to find the most attractive elements of the BRI to be its provision of hard infrastructure. Likewise, the BRI provides China with an opportunity to use its considerable economic means to finance these infrastructure projects around the world. The Asian Development Bank (ADB) estimates that the developing countries of Asia collectively will require $26 trillion in infrastructure investment to sustain growth.
Leveraging these needs against its economic strength may ultimately garner China significant political gains. Notably, many of the areas targeted by China suffer from underinvestment due to domestic economic struggles, and they often register low on the United Nations Human Development Index (HDI). Myanmar and Pakistan — two countries heavily targeted by the BRI — rank 148th and 150th globally in terms of HDI.
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To support the BRI, Beijing has injected massive amounts of capital into Chinese public financial institutions, such as the Chinese Development Bank (CDB) and the Export-Import Bank of China (EXIM). These banks enjoy low borrowing costs, as their bonds are treated like Chinese government debt with very low interest rates and they have access to lending from the People’s Bank of China, allowing them to lend cheaply to Chinese companies working on BRI projects.
This easy financing enables China’s state-owned enterprises (SOEs) to offer highly competitive bids for projects against foreign companies that might be more financially constrained. For instance, in 2015 Japanese construction companies lost out to their Chinese counterparts in a bid to build a high-speed rail project in Indonesia.
Discussing the reasons behind their choice, the Indonesian government cited Chinese financing from the CDB, which came with fewer strings attached. It should be noted, however, that the project has been fraught with problems. Critics have decried the terms of the contract, which has been revised several times since it was awarded, as unrealistic. Furthermore, contractors have yet to break ground on the railway due to licensing and land acquisition issues.
Some BRI projects are already underway, such as those associated with the China-Pakistan Economic Corridor (CPEC) — a 3000-kilometer corridor that runs from China’s Kashgar to Pakistan’s Gwadar. CPEC includes a wide array of infrastructure projects including highways, railways, pipelines, and optical cables, but more than half of the total planned investment for CPEC will go to energy projects like power plants. He Lifeng, Chairman of China’s National Development and Reform Commission, notes that CPEC is “an important loop in the larger chain of the Belt and Road Initiative, and would enable the possibility of a 21st Century Maritime Road.”
Pakistani leaders also view CPEC as important. In the face of a recent slowdown of CPEC projects due to geopolitical tensions, Pakistan Prime Minister Imran Khan took controversial steps in October 2019 to push forward the development of CPEC and provide tax exemptions for the state-owned Chinese Overseas Ports Holding Company, which operates Pakistan’s Gwadar Port.
