Context: In its annual meeting in Beijing, China’s Parliament has hinted at a shift in how it will pursue its signature Belt and Road Initiative (BRI) amid growing concerns about debt repayments from many partner countries because of the coronavirus (COVID-19) pandemic.
About BRI(Belt and Road initiative):
BRI is China’s ambitious project announced in 2013. It is an ambitious programme to connect Asia with Africa and Europe via land and maritime networks along six corridors with the aim of improving regional integration, increasing trade and stimulating economic growth.
- The BRI was written into the Communist Party of China’s Constitution in 2017, underlining its special status.
- It drew inspiration from the concept of the Silk Road established during the Han Dynasty 2,000 years ago – an ancient network of trade routes that connected China to the Mediterranean via Eurasia for centuries.
- The BRI comprises a Silk Road Economic Belt – a trans-continental passage that links China with south east Asia, south Asia, Central Asia, Russia and Europe by land and a 21st century Maritime Silk Road - a sea route connecting China’s coastal regions with south east and south Asia, the South Pacific, the Middle East and Eastern Africa, all the way to Europe.
- The initiative defines five major priorities:
- policy coordination;
- infrastructure connectivity;
- unimpeded trade;
- financial integration;
- and connecting people.
- The programme is expected to involve over US$1 trillion in investments, largely in infrastructure development for ports, roads, railways and airports, as well as power plants and telecommunications networks.
Financial assistance under BRI: cheque book diplomacy
- China’s financial assistance included grants, interest-free loans and preferential loans.
- Interest-free loans which are offered by the Chinese government are applicable for debt relief.
- If any debtors encounter difficulties to pay on time, there may be tailored plans including rescheduling or China increasing funding to help related projects resume operation and return profits.
- Repayments could be solved by China adding grants to help bring projects back to life, conducting debt-to-equity swaps, or hiring Chinese firms to assist in the operation.
Concerns for BRI:
- Chinese debt trap: In recent weeks, China has faced calls from countries in Asia and Africa to delay or waive debt repayments in wake of the Coronavirus pandemic.
- According to AidData, China’s grants and loans totalled $354.4 billion between 2000 and 2014, of which 23% was grants while the rest were commercial loans at market or close-to-market rates.
- The world’s debt to China grew 10 times between 2000 and 2017, with developing countries owing $380 billion to China, the Kiel Institute for the World Economy in Germany said in a report last year.
- Belt and Road countries having poor debt ratings, they also tend not to fare so well in international corruption indexes.
- Examples of wrongdoings:
- The Hambantota fiasco: The leasing of the Hambantota Port for 99 years at this stage of Sri Lanka’s economic development for just US$ 1.12 billion to a Chinese company (China Merchants Ports Holding Company) has put SriLanka into aChinese debt trap.
- Bangladesh shut down a highway project that was supposed to have been built by the China Harbour Engineering Company due to bribery allegations.
About the National People's Congress: How China is ruled?
- Under China's 1982 constitution, the most powerful organ of state is meant to be the National People's Congress (NPC), China's parliament.
- Composition: The congress is made up of nearly 3,000 delegates elected by China's provinces, autonomous regions, municipalities and the armed forces.
- The NPC and the Chinese People's Political Consultative Conference (CPPCC) are collectively known as the "Two Sessions".
- The congress also "elects" the country's highest leaders, including the state president and vice-president, the chairman of the government's own Military Affairs Commission and the president of the Supreme People's Court.
- Tenure: Delegates hold office for five years, and the full congress is convened for one session each year.
- In theory, the congress has the power to change the constitution and make laws. But the congress is seen as largely a rubber stamp for party decisions.
- Real influence lies within a standing committee of about 150 members elected from congress delegates. It meets every couple of months.
- About 70% of its delegates - and almost all its senior figures - are also party members. Their loyalty is to the party first, the NPC second.
- The party drafts most new legislation and passes it to the NPC for "consideration".