25 October, 2020

Rethink What You Know About Xi's Belt and Road


Countries of the Belt and Road.

Earlier this month I wrote:

I wish less analysts asked, "What did Xi hope to accomplish by creating the Belt and Road?" and instead wondered, "What did Xi hope to accomplish by associating the SOE infrastructure-industrial complex so closely with his personal foreign policy?" [1]

This question follows naturally from the arguments of many smart observers and analysts. My understanding of Belt and Road realities builds directly from work done by Lee Jones, Min Ye, Zeng Jingshan, Baogang He, Matt Schrader, Christina Constantinescu, Michele Ruta, Andrew Batson, Mark Akpaninyie, Shahar Hameiri and Yuen Yuen Ang. [2] If the standard image of the Belt and Road is of a highly centralized, carefully orchestrated geoeconomic strategy designed to  increase Beijing's strategic leverage and build the foundation of a new Chinese world order, the picture that emerges from these studies is different.  Their initiative  seems to be more  marketing strategy than power play. Many of the most prominent projects were announced, financed, or began construction before Xi ever uttered the words "One Belt, One Road;" the Ministry of Foreign Affairs has almost no influence over project selection or development. SOEs and state policy banks (the main players in China's "infrastructure industrial complex") are in the driver's seat. Researchers who have interviewed SOE project managers conclude that profit, not geopolitical importance, decides investment and construction decisions. Unsurprisingly, there is almost no correlation between the high level strategic guidance that is supposed to determine outbound investment priorities and actual flows of money. It is quite likely that every single BRI-branded project now under construction would still be under construction if they were never BRI-branded. That branding has less to do with Politburo guidance (much less explicit plans to ensnare poor countries in "debt-traps") than it does with racking up loyalty points to Big Uncle Xi. 

I believe the evidence for this picture is  unassailable. But if you believe, as I now do, that the decentralized tangle of companies, loans, and projects that we call "the Belt and Road" was not created or directed by Xi Jinping or his Central Committee, you are still left with a question: if the Belt and Road can be boiled down to branding, why did Xi Jinping decide to make this branding the cornerstone of his foreign policy? If it is all really is a marketing strategy, just what was Xi trying to market? Maybe the sales pitch is a power play?

I take a stab at these questions in a new essay I have published over at Palladium. I suggest that

There are two apparent rationales for Xi’s decision to claim the globalization of the SOE infrastructure-industrial complex as hisppersonal brainchild. The first is that Xi hoped that this framing might shape the contours of future outbound investment and construction, bending them towards his personal diplomatic priorities.[2]

 These priorities include the "six economic corridors" and other infrastructure in geopolitically important locales. This more or less accords with the standard understanding of the BRI. I note, however, that Xi's directions on this front are limited by the tools he has to do the directing:

Reducing complex political processes down to bland slogans (“belt and road”), numbered lists (“six major economic corridors”), and overly broad policy guidelines (“give priority to projects of strategic importance”) is a strategy of control that Chinese communist leaders often turn to. They lead a party-state whose members number in the tens of millions; most individuals working for it find themselves subject to overlapping, and sometimes conflicting, lines of authority. True centralized direction of this morass is not possible. To form order from chaos, party leaders rely on propaganda and sloganeering to communicate directly to the cadre on the scene. Party leaders dispense with detailed directives that foresee every contingency in hope that cadres will grasp the principles of the party’s guiding ideology and then develop their own path for implementing these principles in their unique situation. When Xi declares that “whether we succeed in our pursuit of peaceful development to a large extent depends on whether we can turn opportunities in the rest of the world into China’s opportunities,” he does so knowing that his statement will repeated and reprinted in state publications that diplomats, SOE managers, military officers, and party bureaucrats must read. It is their responsibility to turn broad and bland platitudes into individual plans of action.[3]

 But there is a catch: this method of control works best for shaping the behavior of cadres who do not face other conflicting incentives. The problem with the BRI is that the "other conflicting incentives" are very clear:  striking rich on the one hand, drowning in a sea of red on the other. This goes a large way towards explaining the mismatch between centralized direction and the initiative's unplanned, chaotic reality.

The other rationale behind Xi's marketing strategy is more interesting:

 Loudly calling attention to SOE projects and investment abroad allows Xi to subvert hostile narratives surrounding China’s rise. Christening foreign development projects as the central plank of Xi’s grand strategy was an attempt to legitimize China’s return to superpower status. “Promoting BRI, boosting win-win cooperation between China and other countries, and pursuing common development,” Xi informs his diplomats, means “tell[ing] the world China’s success stories, [and through these means] promot[ing] mutual understanding and friendship between China and other countries.”

The legitimizing mission of the Belt and Road is seen in Xi’s invitation to “welcome others to join China’s express train of development.” This was an intentional bid for prestige: China was openly offering “a new trail for other developing countries to achieve modernization” on terms not set by the West. Xi made this clear in 2017 when he declared that “the banner of socialism with Chinese characteristics is now flying high and proud for all to see,” and that the party was

Blazing a new trail for other developing countries to achieve modernization. [The Chinese example] offers a new option for other countries and nations who want to speed up their development while preserving their independence; and it offers Chinese wisdom and a Chinese approach to solving the problems facing mankind.

This sort of rhetoric changed the terms of SOE engagement with outside clients. What would have been understood as business deals between individual SOEs and governments who purchased their services have been transformed into diplomatic endorsements of the “Chinese approach to solving the problems facing mankind.” Each Memorandum of Understanding signed by a foreign government would legitimize the Chinese development path—and the Chinese Communists who pioneered it. [4]

 But this legitimizing aspect of the Belt and Road branding is something with a double edged sword. If all the good individual Chinese companies were doing would now be credited to the Communist Party and its development model... then all of the bad they do would be credited to the Party as well! As I argue:

Transforming SOEs cash-cow projects into handmaidens of China’s national rejuvenation had unanticipated consequences. Americans who might have dismissed these projects as an ad-hoc series of bilateral investment agreements now saw them as a challenge to America’s global leadership. Reactions in Tokyo and New Delhi were just as hysterical, and from the Chinese perspective, just as preventable. The natural reaction of the world’s dragon-slayers to BRI publicity was to hunt for BRI projects they might discredit—a task made far easier by the consequences of Xi’s branding campaign.

In the words of one economist, Xi’s decision to associate SOE firm strategy with his personal diplomatic brilliance “gave the SOE infrastructure-complex carte blanche to pursue whatever projects they [could] get away with.” Poor investments that would have once drawn criticism, or at least extra scrutiny, by observers in China were now given a free pass, as few Chinese would risk tarring an initiative the General Secretary had invested so much of his personal prestige into. Outside China, in contrast, critics would now credit sloppiness or malfeasance not to the failings of individual SOES or financial consortiums, but to the malevolence of the Chinese government. Anything that went wrong with any project would now be laid directly at the feet of Xi Jinping.

Thus, the long string of BRI related incidents that have elevated what were essentially commercial or financial disputes into crises in the diplomatic relationship between China and various BRI host countries....

There is little evidence that Beijing ever intended any of its projects to become debt-traps, nor that they would even have the ability for this level of central strategic action. Yet haphazard project selection was an inevitable outcome of Xi’s decision to make the SOEs and policy banks—domestic actors that face no incentive to take the party’s long-term foreign policy priorities seriously—the foundation of his grand strategy.[5]

 For this reasons I judge the Belt and Road a failure, a strategy doomed from conception to cost Chinese diplomacy more than it has gained it:

Branding this inheritance a central plank of Chinese foreign relations was his mistake. The actors were too various, and their relationships too complex, for a simple system of centralized control. This left Xi with little choice but to rely on the propaganda and ideology apparatus to try giving the Belt and Road strategic direction. These tactics for guiding cadre behavior are powerful in the absence of other incentives—but when there were billions of dollars to be made, the siren call of those other incentives sounded far louder than the exhortations of Xi Jinping Thought. The irony is that foreigners did pay attention to Xi’s exhortations. Xi then found himself paying costs for a strategy he could proclaim but could not implement. [6]
I have only reproduced a part of my essay here—I encourage you to head over to Palladium and read the full thing.

Readers interested in exploring more of my writing on the Xi Jinping or his Belt and Road may find the posts "The Utterly Dysfunctional Belt and Road," "Xi Jinping and the Laws of History," "The World That China Wants," and "Two Case Studies in Communist Insecurity" of interest.   To get updates on new posts published at the Scholar's Stage, you can join the Scholar's Stage mailing list, follow my twitter feed, or support my writing through Patreon. Your support makes this blog possible.

 [1] Tanner Greer, "Counting Speeches to Understand Xi Jinping," Scholar's Stage (12 October 2020).

[2] Lee Jones and Shahar Hameiri, “Debunking the Myth of ‘Debt-trap Diplomacy’ How Recipient Countries Shape China’s Belt and Road Initiative,” Chatham House Research Paper (August 2020); Min Ye, The Belt Road and Beyond: State-Mobilized Globalization in China 1998–2018 (Cambridge: Cambridge University Press, 2020);  Andrew Batson, “The Belt and Road is about domestic interest groups, not development,” Andrew Batson’s Blog (2 May 2019); Mark Akpaninyie, “China’s ‘Debt Diplomacy’ Is a Misnomer. Call It ‘Crony Diplomacy,” The Diplomat (12 March 2019); Lee Jones and Zeng Jinghan, “Understanding China’s “Belt and Road Initiative”: Beyond “Grand Strategy” to a State Transformation Analysis," Third World Quarterly (2019);  Baogang He, "The Domestic Politics of the Belt and Road Initiative and its Implications," Journal of Contemporary China, vol 28, iss 16 (2019); Yuen Yuen Ang, “Demystifying Belt and Road,” Foreign Affairs (22 May 2019); Cristina Constantinescu and Michele Ruta, “How Old is the Belt and Road Initiative?” MTI Practice Notes No. 6 (December 2018);  Matt Schrader, “World Bank Offers Timely, Dubious Praise for Belt and Road,” Jamestown China Brief (20 November 2018).

[3] Tanner Greer, "The Belt and Road Has Backfired on Xi," Palladium (24 October 2020).

[2]  ibid.

[4] ibid.

[5]  ibid.

[6]  ibid.

1 comment:

Anonymous said...

BRI gives Xi a political excuse to subsidize SOEs (through bank loans and debt issuance) and prevent (or slow) unemployment. It is mainly a domestic, economic policy, though branded as diplomatic ambitions.