The Emperor’s New Road: China and the Project of the Century

by Jonathan E. Hillman

  THE EMPEROR’S NEW ROAD

  Published with assistance from the Mary Cady Tew Memorial Fund.

  Copyright © 2020 by Jonathan E. Hillman.

  All rights reserved.

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  The Center for Strategic and International Studies (CSIS) is a bipartisan, nonprofit policy research organization dedicated to advancing practical ideas to address the world’s greatest challenges.

  CSIS does not take specific policy positions; accordingly, all views expressed herein should be understood to be solely those of the author.

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  Contents

  Preface

  PART I EMPIRE STRIKES BACK

  1. Project of the Century

  2. Imperial Echoes: Technology and the Struggle for Control

  PART II TO EUROPE

  3. The Crossroads: Central Asia

  4. The Gatekeeper: Russia

  5. The Bridgehead: Central and Eastern Europe

  PART III TO THE SEA

  6. The Weak Are Powerful: Southeast Asia

  7. The Black Hole: Pakistan

  8. Game of Loans: Sri Lanka

  PART IV DANGER AHEAD

  9. War and PEACE: East Africa

  10. Refining the Blueprint

  Notes

  Acknowledgments

  Index

  Preface

  TRAPPED IN NO MAN’S land, somewhere between China and Kyrgyzstan, I had time to think. Border guards at checkpoint five of seven had just started their lunch break, and I had to wait for their return. A few days earlier, I had attended the first Belt and Road Forum in Beijing, a massive and tightly choreographed celebration of Xi Jinping’s signature foreign-policy vision for connecting China and the world. But on China’s border, things were moving slowly, if at all. As minutes stretched into hours, the idea for this book was born.

  In Washington, DC, and other Western capitals, policy makers heard about the forum in Beijing. They read about dozens of foreign leaders showing up, over sixty countries signing onto China’s effort, ancient trade routes being revived, and other grand claims, often the same ones that Chinese state media tout. They saw maps of new economic corridors running outward from China. All these details add to an image of China as cunning, strategic, and marching in lockstep toward midcentury.

  They missed the lunch breaks and border delays. From afar, the challenges standing in the way of China’s global ambitions, including actual mountains, look smaller. Ironically, given an abundance of suspicion, relatively little has been done to check whether actions on the ground are advancing these ambitions. Quite understandably, most people cannot spend time crossing China’s borders by car, foot, and boat or climbing onto its trains and docks in other countries, as I have done while writing this book. These pages share those glimpses of ground truth.

  When the border guards returned several hours later and waved my vehicle through, arriving in Kyrgyzstan was something of a homecoming. In 2009, I lived in Bishkek, Kyrgyzstan’s capital, as a Fulbright scholar. I was fascinated by how Central Asia reflected and balanced outside influences. I was greeted by Asians who prayed to Allah, drank vodka, spoke Russian, ate Turkish food, listened to American music, and traded Chinese goods. I came to appreciate how the world’s crossroads provide a checkup of the global order.

  Kyrgyzstan is different a decade later. Gone is the U.S. military base that served as a hub for troops and supplies going to Afghanistan. China’s presence has poured out of the bazaars and into new roads, fiber-optic cables, and power projects. Xinhua, the Chinese state-media outlet, has opened a “cultural center” in Bishkek that sells copies of Xi Jinping’s writing. Yet the Kyrgyz people are hardly sold. Rather than warming to Xi’s call for a “community of common destiny,” many are wary of China’s influence and appalled by its internment of ethnic minorities.

  This landscape, as I have tried to show it, has much in common with the past, but it is more complex than any “Great Game” or imperial contest. While the United States mostly complains these days, China is forging ahead. But it is not doing so alone or uncontested. Japan, India, Russia, and many others have their own designs. Far from being pawns, smaller countries are often the most pivotal players. Many of them have far more recent experience dealing with outside powers than China has acting as one. The road is theirs, as I hope it will remain for years to come.

  PART I

  Empire Strikes Back

  China’s Belt and Road Initiative

  Center for Strategic and International Studies, Reconnecting Asia Project; Xinhua

  CHAPTER ONE

  Project of the Century

  THE ORCHESTRA STRUCK UP as the People’s Leader entered the cavernous hall. As he strode down the red carpet, entourage at his back, his hundreds of distinguished guests stood and applauded. They fell silent when he took the dais.

  “Dear friends,” he said, looking out at the sea of visitors. “This is indeed a gathering of great minds.”

  In flattering them, he flattered himself. His friends numbered royalty, presidents, merchants, and intellectuals and were a Noah’s ark of nationalities: Asians, Arabs, Africans, Europeans, Persians, and Russians. From all corners of the world, they had trekked to his court. Some came to pay tribute. Some came to trade. Others, like me, came out of curiosity.

  It was a scene that Marco Polo might have recognized from his travels during the thirteenth century, but it was May 14, 2017, at the Belt and Road Forum in Beijing. President Xi Jinping stood before nearly thirty heads of state and delegates from over 130 countries. “In the coming two days,” he explained, “we will contribute to pursuing . . . a project of the century.”

  But that was an understatement. China’s Belt and Road Initiative (BRI), pursued to its end, stands to become the project of the century. Its size and reach are staggering. China has promised to spend $1 trillion building new roads, railways, and other infrastructure beyond its borders. Adjusted for inflation, that is roughly seven times what the United States spent through the Marshall Plan to rebuild western Europe after World War II. It is five times as much as the Trump administration proposed and failed to persuade Congress to provide for infrastructure within the United States. The contrast is striking: the world’s leading power no longer leads, while its rising power charts a course to the center of everything.1

  It is impossible to fathom the BRI without a map. When Xi announced the BRI in 2013, it had two key aspects: an overland “belt” across the Eurasian supercontinent and, somewhat confusingly, a maritime “road” across the Indian O
cean and up to Europe via the Suez Canal. Originally called “One Belt, One Road,” its purported aims are to deepen trade, investment, policy coordination, and even cultural ties. These new connections all have one thing in common: they lead to China.

  Xi’s vision is constrained by neither geography nor even gravity. Since its announcement, the BRI has stretched into the Arctic, cyberspace, and outer space. The list of participants has grown to exceed 130 nations and includes not only China’s neighbors but also most African countries and even countries in Latin America.2 After Governor Jerry Brown of California visited China in June 2017, Chinese state media mischievously speculated that California could join.3

  The same forces that powered China’s meteoric rise are now being channeled through the BRI and beyond its borders. Over just a decade, China went from having no high-speed railways to having more than the rest of the world combined. Increasingly, Chinese companies challenge those from Japan, Europe, and other advanced economies for projects in world markets.

  The BRI also provides a runway for China’s bloated state-owned companies to take off and parachute into new markets. Between 2011 and 2013, China used more cement than the United States required during the entire twentieth century, and its ability to build now outstrips its domestic needs.4 Home to seven of the world’s ten largest construction companies, China desperately needs to ensure paychecks for its millions of workers.5 The BRI is their safety net.

  The BRI has become more than a policy—it is a brand. With such large amounts of investment available, central and local governments, private firms, and nonprofit organizations are incentivized to repackage their work around the BRI. Over one hundred Chinese think tanks are dedicated to studying it. In China, there are “Belt and Road” fashion shows, music festivals, and art exhibits. Belgrade’s annual marathon was added to the Belt and Road Marathon Series. This race was different. “It does not focus on the competition level, but more on friendship, cultural exchange and promoting economic growth,” an organizer explained.6

  But for all the attention the BRI receives, it remains poorly understood. A major challenge is that the BRI label evades classification. There is no official definition for what qualifies as a BRI project. There are Chinese-funded projects in nonparticipant countries that share many of the same characteristics. The BRI was officially launched in 2013, but projects that were started years earlier are often counted. China’s lending is opaque, leaving observers to piece together bits of information from public sources and keeping many details secret.7

  The effort is undeniably bold, and it has been compared to xieyi, a traditional Chinese painting style that uses broad brush-strokes to capture emotions rather than minute details. In 2018, at a speech marking the fifth anniversary of the BRI, Xi called for moving from that style to the gongbi style, a realistic technique that produces meticulous paintings.8 It was a clever way of acknowledging that many details still needed to be worked out. When viewed up close, the BRI begins to lose focus.

  Grasping in the Dark

  As in the parable of the blind men and the elephant, observers have struggled to describe the BRI because they have latched onto different parts of this beast.9 Some feel a gift horse, and they are content to accept it with flaws. Many of China’s partner countries have few options for meeting their investment needs. Developing Asia alone needs $26 trillion in infrastructure investment by 2030 to maintain growth and adapt to climate change.10 China cannot satisfy those needs, but it is going boldly into markets where few others dare to go.

  Some feel a beast of burden, a force to pull their own agendas. Multilateral institutions see an opportunity for global development and a chance to expand their own budgets. At the Belt and Road Forum, the World Trade Organization signed an agreement with China, as did the World Bank, the World Health Organization, and other international agencies. Top officials at the United Nations (UN) have embraced the BRI, declaring that it supports the UN’s 2030 development agenda and even producing a cartoon that extolls its benefits.11

  Some feel a golden goose. The CEO of the German conglomerate Siemens has called the BRI “the next World Trade Organization.” Herbert Smith Freehills, an elite international law firm, has assembled a working group of over eighty lawyers for BRI projects.12 The management consulting firm McKinsey has found opportunities on both sides of the negotiating table, advising Chinese state-owned companies as well as recipient countries on major deals. HSBC and other major financial institutions have assembled BRI teams to source deals and make friends in Beijing.

  Some feel a trojan horse. When HSBC’s official Twitter account asked, “What do you think of when you hear the term Belt and Road?” it opened the floodgates to a wave of negative responses, which included “Imperialism,” “neocolonialism,” and “China exporting debt,” among others.13 Twitter is full of snark and outrage, but U.S. government warnings about the BRI are not so different. “China is diligently building an international network of coercion through predatory economics to expand its sphere of influence,” then-acting U.S. Secretary of Defense Patrick Shanahan said in 2019, pointing to suspicious port investments in the Indian Ocean.14

  Some sense that the elephant is white. Fitch, the ratings agency, was one of the first dissenting voices to suggest that economics might be taking a backseat to politics along the BRI. “Chinese banks do not have a track record of allocating resources efficiently at home, especially in relation to infrastructure projects—they are unlikely to have more success overseas,” it pointed out.15 Leaders are eager to announce new projects to reward supporters and cement their legacies. China’s massive firms are happy to build them, regardless of their commercial or strategic value. Both sides exploit the lag between opportunity and accountability. When the bill comes due, it will be someone else’s problem.

  There are elements of truth to each of these perspectives, but none fully captures the creature in question. No single perspective can. The BRI is a global initiative, but its contours depend on local context. Some projects help development. Others serve China’s strategic aims. Some will do both. Other projects will fail outright. If the BRI is a painting, each country is a unique canvas, shaped by geography and colored with its own history and culture. Seeing the BRI as it is requires traveling to the places where it is unfolding. Discerning its unique qualities, and imagining what it could become, requires an appreciation for what has come before it.

  The Education of a Rising Power

  Weaving together history and fieldwork in sixteen countries, this is a book about China outside of China.16 It provides a middle view that is often missing between cotemporary high-level views of China’s foreign activities and the messier reality on the ground.17 I focus primarily on the Eurasian supercontinent because it has attracted the majority of Chinese investment and construction spending since the Belt and Road was announced.18 It is also where most of the world’s people and economic output reside. Many hot spots and flagship projects are included, but more places surely deserve attention.

  This book, at its core, is about power. I focus on China’s infrastructure projects because they are the carrot for convincing countries to participate, the spoils for China’s national champions, and the source of the West’s greatest anxieties about the BRI. Every project is a negotiation, and the most contested are windows into society. They reflect the ambitions and flaws of their designers. They are conduits for resources and symbols of prestige. They can reshape relations within and between countries, for better or worse.

  The painting that emerges in these pages is not the one of global goodwill promoted in Beijing, nor the one of strategic cunning perceived in Washington. From sweeping maps to individual investments, relatively little has been done to verify whether China’s activities actually match its aspirations. The challenge is understandable. The BRI is opaque and vague by design. But grasping in the dark, many observers have imposed order where it does not exist. Chinese officials have only a loose grip on the brush, and others have b
een happy to fill in the details for them. That is changing, as China learns, but the difficulties it faces are enormous.

  Around the world, China is retracing the footsteps of colonial powers and repeating their mistakes. Cleverly, Chinese officials cloak their efforts in “Silk Road” caravans and other romanticized images of ancient times, but as Chapter 2 argues, there is a more recent period that urges caution. During the great-power competition that lasted from the mid-nineteenth century to World War I, western powers pursued major infrastructure projects to expand their influence at the expense of indigenous people, the environment, and economic stability. As a weaker state, China resisted strategies similar to those it now employs as a rising power.19

  Despite these imperial echoes, this is not a story about China’s domination but its education as a rising power. China’s tool of choice, infrastructure, is appealing to developing countries but incredibly difficult to deliver. Even in the best business environments, most large projects cost more than expected, take longer than expected, and deliver fewer benefits than expected. Infrastructure is often touted as a solution to society’s employment and productivity woes, but the reality is that done poorly, projects destroy more value than they create.20

  I once put that argument to a room full of Chinese officials responsible for planning the BRI’s initial stages. I had been asked to come and present my research on their initiative. It felt like being asked to tell Thomas Edison about lightbulbs, but I wanted to see how they would react. The answer? Blank stares. Apparently, the notion that bad projects might ultimately leave people and places worse off just did not compute. After all, China’s own rise has been fueled by dramatic infrastructure spending. Its top leaders have all ascended in a system that rewards GDP growth, which they have learned to boost through building infrastructure.21

  These incentives favor quantity over quality, masking longer-term costs. Within China, “ghost cities” artificially boost growth figures and then sit unused. The same playbook that Chinese planners have used at home, where they have fewer checks on their authority, faces even greater challenges abroad. Risks are so high and widespread along the BRI that three out of four participating countries have sovereign-debt ratings that are either junk or not rated.22 As the financial and reputational costs of failed projects mount, China is beginning to appreciate why Western countries pool their resources through the World Bank and other multilateral institutions and put safeguards in place.