What is China’s Belt and Road?

Another form of domestic politics?  Here is Andrew Batson on his blog:

The Belt and Road is really the expansion of a specific part of China’s domestic political economy to the rest of the world. That is the nexus between state-owned contractors and state-owned banks, which formed in the domestic infrastructure building spree construction that began after the 2008 global financial crisis (and has not yet ended).

Local governments discovered they could borrow basically without limit to fund infrastructure projects, and despite many predictions of doom, those debts have not yet collapsed. The lesson China has learned is that debt is free and that Western criticisms of excessive infrastructure investment are nonsense, so there is never any downside to borrowing to build more infrastructure. China’s infrastructure-building complex, facing diminishing returns domestically, is now applying that lesson to the whole world.

In Belt and Road projects, foreign countries simply take the place of Chinese local governments in this model (those who detect a neo-imperial vibe around the Belt and Road are, in this sense, onto something). Even the players are the same. In the 1990s, China Development Bank helped invent the local-government financing vehicle structure that underpinned the massive domestic infrastructure. Now, China Development Bank is one of the biggest lenders for overseas construction projects.

Those who defend the Belt and Road against the charge of debt-trap diplomacy are technically correct. But those same defenders also tend to portray the lack of competitive tenders and over-reliance on Chinese construction companies in Belt and Road projects as “problems” that detract from the initiative’s promise. They miss the central role of the SOE infrastructure-complex interest group in driving the Belt and Road. Structures that funnel projects funded by state banks to Chinese SOEs aren’t “problems” from China’s perspective–they are the whole point.

The fact that this model was dubbed the “Belt and Road Initiative” and turned into a national grand strategy by Xi Jinping effectively gave the SOE infrastructure complex carte blanche to pursue whatever projects they can get away with. These projects were no longer just money-makers for SOEs, but became a way to advance China’s national grand strategy–thereby immunizing them from criticism and scrutiny.

And Andrew is always worth reading on music and jazz.


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