The “Belt and Road Initiative” (BRI), formerly known as “One Belt One Road” (OBOR) as well as “The New Silk Road”, is a global development strategy initiated by the Chinese government in 2013, during official visits to Kazakhstan and Indonesia.
The BRI, formally adopted after the 19th National Party Congress in 2017, engages about 70 countries in an international economic collaboration based on investments and infrastructures, and it is considered the core of President Xi Jinping’s foreign policy.
Belt and Road, or 一带一路 yi dai yi lu, is a “21st century silk road,” confusingly made up of a “belt” of overland corridors and a maritime “road” of shipping lanes (Lily Kuo & Niko Kommenda 2020) improving connectivity and cooperation among multiple countries in Asia, Africa and Europe. The project involves the building of a big network of roadways, railways, maritime ports, power grids, oil and gas pipelines, and associated infrastructure projects (Shobhit Seth, 2020).
The project will expand six economic corridors: The New Eurasian Land Bridge, which connects Western China to Western Russia; The China-Mongolia-Russia Corridor, which connects North China to Eastern Russia via Mongolia; The China-Central Asia-West Asia Corridor, which connects Western China to Turkey via Central and West Asia; The China-Indochina Peninsula Corridor, which connects Southern China to Singapore via Indochina; The China-Pakistan Corridor, which connects South Western China through Pakistan to Arabia sea routes; The Bangladesh-China-India-Myanmar Corridor, which connects Southern China to India via Bangladesh and Myanmar. (Ibid)
What Was the original Silk Road?
The original Silk Road arose during the westward expansion of the Chinese Han Dynasty (206 BCE–220 CE), which forged trade networks throughout what today are the Central Asian countries of Afghanistan, Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan, as well as modern-day India and Pakistan to the south. Those routes extended more than four thousand miles to Europe (Chatzky and McBride, 2020).
As the Silk Road was not including only a single thoroughfare from East to West, historians initially preferred to use the term “Silk Routes”, but Silk Road remains the most common and recognised name. The European explorer Marco Polo (1254-1324 CE) traveled on these routes and described them in depth in his famous work “Marco Polo’s Silk Road”,but he did not named them. Both terms for this network of roads were coined by the German geographer and traveler, Ferdinand von Richthofen, in 1877 CE, who designated them ‘Seidenstrasse’ (silk road) or ‘Seidenstrassen’ (silk routes).
The network was used regularly from 130 BCE, when the Han officially opened trade with the west, to 1453 CE, when the Ottoman Empire boycotted trade with the west and closed the routes. By this time, Europeans had become used to the goods coming from the east and, when the Silk Road closed, merchants needed to find new trade routes to meet the demand for these goods.
Debt sustainability and BRI
As envisioned, BRI spans at least 68 countries with an announced investment as high as $8 trillion for a vast network of transportation, energy, and telecommunications infrastructure linking Europe, Africa, and Asia. It is an infrastructure financing initiative for a large part of the global economy that will also serve key economic, foreign policy, and security objectives for the Chinese government.
Yet, important questions arise on sustainable financing of the initiative within BRI countries, and how the Chinese government will position itself on debt sustainability. Infrastructure financing, which often entails lending to sovereigns or the use of a sovereign guarantee, can create challenges for sovereign debt sustainability. When the creditor itself is a sovereign, or has official ties to a sovereign as do China’s policy banks—China Development Bank (CDB), the Export-Import Bank of China (China Exim Bank), and the Agricultural Development Bank of China (ADBC)—these challenges often affect the bilateral relationship between two governments. They are also, to varying degrees, guided by standards determined by multilateral institutions like the World Bank and International Monetary Fund (IMF), or by multilateral mechanisms like the Paris Club. (John Hurley, Scott Morris, and Gailyn Portelance 2018).
There is also concern that debt issues will create an unfavorable degree of dependency on China as a creditor. Increasing debt, and China’s role in managing bilateral debt problems, has already exacerbated internal and bilateral tensions in some BRI countries, such as Sri Lanka, where citizens have regularly clashed with police over a new industrial zone surrounding Hambantota port,3 and Pakistan, where Chinese officials openly appealed to opposition politicians to embrace the construction of the China-Pakistan Economic Corridor (CPEC), BRI’s “flagship project” to bolster ties between Beijing and Islamabad. (The Economist, May 2017).
A widely quoted ADB study asserts that in Asia alone, $26 trillion in infrastructure investments are needed over the 2016-2030 period to maintain 3 to 7 percent economic growth, eliminate poverty, and respond to climate change.(ADB, 2017).
China-Italy cooperation in the Belt and Road Initiative
Ties between China and Europe continue to grow with the latest European countries signing the BRI co-operation instruments being Luxembourg and Italy in March 2019.
Italy is the first member of the Group of Seven major developed economies (most commonly known as the G7) to conclude a BRI co-operation instrument.
During Chinese President Xi Jinping’s visit to Rome on 23rd March 2019, the Chinese and Italian governments signed a BRI related memorandum of understanding (the “China-Italy MoU”). In essence, the document expressed Italy’s desire to strengthen political relations and economic ties with China by increasing co-operation in areas such as policy development, transport, logistics and infrastructure, trade, investment, and finance.(Belt and Road News, 2019).
Between 2005 and 2018, Chinese investments in Italy reached USD 24.99 billion, the fourth highest in the EU after the UK, Germany and France. By 2018, China accounted for USD 15 billion of Italian exports, making it Italy’s ninth-largest export market. In turn, in 2018 imports from China to Italy were worth USD 36 billion.
The launch of the BRI has further increased China’s interest in investing in Italy — not least thanks to Italy’s port infrastructure which is no doubt a big draw for China. In particular, the port of Trieste in northern Italy is an important entry point for Chinese products into the rest of Europe. During President Xi Jinping’s visit to Rome in March 2019, the China Communications Construction Company (a State-owned infrastructure group) signed cooperation agreements with the port authorities of Trieste and Genoa.
Recent data seems to suggest that the signing of the China-Italy MoU has bolstered Chinese investment in Italy. In April 2019, it was reported that Chinese investors signed separate deals in Italy amounting to USD 2.8 billion worth of projects.
Sino-Italian Partnership, a European concern
The main problem surrounding China’s signing the Memorandum of Understanding with Italy is that it might jeopardise Europe’s attempt to create a united negotiating front vis-à-vis Beijing. One of the common European concerns is the potential deal between Washington and Beijing that could allow American interests to secure a large portion of the Chinese market at the expense of the European countries.
Internal competition within EU members is also another factor that influences this polarisation. Northern European countries, home to the main port facilities that have so far monopolised Europe-Far East maritime trade, risk of suffering from potential competition from the Mediterranean ports that might come via Chinese investments. The mounting friction between Italy and France, which has seen Italian PM Giuseppe Conte’s government in disagreement with Macron’s pro-European one within Europe, could be seen as another factor to be taken into account.(Fardella, Prodi, 2019)
Moreover, Chinese 5G technology is more advanced than its Western equivalent, contributing to an increase in probability for America’s Europeans partners to use it. While the ban on Chinese technology might be understandable from an American perspective, it might be considered short-sighted within the European Union, which mostly conceives security threat as a manageable risk.
The signing of the MoU by the new Italian government, however, might also weaken Europe’s capability to develop a common response on this issue.
The European criticism with regards to Sino-Italian future relationship can be divided in three sections.
Firstly, Germany and France discourage the Belt and Road MoU because it is not seen in line with European foreign policy. This suggests that German Chancellor Angela Merkel would have opted for a common approach to handle China, but according to her country’s Federal Statistical Office, Beijing and Berlin signed more than 225 agreements in the past decade, positioning Germany as China’s No 1 trading partner within the European Union.
Secondly, the EU and the United States are skeptical about the MoU considering the risk of a debt trap. But this risk has no consistency because of Italy’s membership in the G7. In addition, according to international law, the MoU does not imply obligations for parties.
Thirdly, debates raised in relation to industrial and technological property, with experts considering China insufficiently attentive to reciprocity in this field, despite the status of non-market economy assigned to the mainland since its accession to the WTO in 2001. (Asia Times, 2019).
In some respects, Italy’s Western partners have limited its choices. As for Washington, it was Trump’s dismissal of both the Trans-Pacific Partnership and the Transatlantic Trade and Investment Partnership trade deals that made the BRI so attractive for Rome in the first place. The BRI is now the only major global initiative designed to link Europe with Asia, in terms of infrastructure, trade, and finance. Consequently, it seems reasonable for Italy to long for a piece of the pie”.(Federica Bingi, May 2019).
Valdai Club. 2020. Analytics. [online] Available at: <https://valdaiclub.com/a/highlights/italy-china-cooperation-a-matter-of-concern/>
Oecd.org. 2020. [online] Available at: <https://www.oecd.org/finance/Chinas-Belt-and-Road-Initiative-in-the-global-trade-investment-and-finance-landscape.pdf>
Beltandroad.news. 2020. China, Italy, The European Union And The “Belt & Road Initiative” – Belt & Road News. [online] Available at: <https://www.beltandroad.news/2019/07/23/china-italy-the-european-union-and-the-belt-road-initiative/>
Bindi, F., 2020. Why Did Italy Embrace The Belt And Road Initiative?. [online] Carnegie Endowment for International Peace. Available at: <https://carnegieendowment.org/2019/05/20/why-did-italy-embrace-belt-and-road-initiative-pub-79149>
Council on Foreign Relations. 2020. China’S Massive Belt And Road Initiative. [online] Available at: <https://www.cfr.org/backgrounder/chinas-massive-belt-and-road-initiative>.
Hurley1, J., Morris2, S. and Portelance3, G., 2019. Examining the debt implications of the Belt and Road Initiative from a policy perspective. Journal of Infrastructure, Policy and Development, 3(1), p.139.
Kuo, L. and Kommenda, N., 2020. What Is China’s Belt And Road Initiative?. [online] the Guardian. Available at: <https://www.theguardian.com/cities/ng-interactive/2018/jul/30/what-china-belt-road-initiative-silk-road-explainer>.
Investopedia. 2020. Understanding One Belt One Road (OBOR). [online] Available at: <https://www.investopedia.com/terms/o/one-belt-one-road-obor.asp#:~:text=One%20Belt%20One%20Road%20(OBOR)%2C%20the%20brainchild%20of%20Chinese,Asia%2C%20Africa%2C%20and%20Europe.>
The Economist. 2020. What Is China’S Belt And Road Initiative?. [online] Available at: <https://www.economist.com/the-economist-explains/2017/05/14/what-is-chinas-belt-and-road-initiative>
Autore dell’ articolo *Alessandra Palmeri, specializzata in Relazioni Internazionali alla Nankai University di Tianjin e Dottoressa in lingue e culture e societa’ dell’ Asia e Africa Mediterranea presso la Ca’ Foscari di Venezia. Come sempre pubblichiamo i nostri lavori per stimolare altre riflessioni, che possano portare ad integrazioni e approfondimenti.
*I contenuti e le valutazioni dell’intervento sono di esclusiva responsabilita’ dell’autore.