Infrastructure: Infrastructure is the physical and organizational structures and facilities, for example, buildings, airports, roads, the electrical system, ports.
Linkage: The connection or interconnection between two or more parties. In this case, it is the connection, or the relationship, between countries.
Soft power: the use of economic or cultural pressure as a method of influence.
Debt burden: the obligation to pay back borrowed money. You take a loan? Well, you have acquired a certain debt burden. It is a weight. An obligation.
Debt trap diplomacy: When the creditor country is said to extend excessive credit to a debtor country with the goal of getting economic or political concessions when the debtor country is unable to pay the money back.
Creditor trap: When the lender is unable to collect on loans and is faced with taking a loss.
Contractor: Contractors are professionals or companies who provide skills or services for a limited time. In other words, people, or companies, that are contracted to do something. A contractor.
TOPIC: China’s Belt and Road Initiative
The Belt and Road Initiative, or BRI, is a global infrastructure plan conceptualized in China in 2013. Under this initiative, China works with partner countries to design and implement large infrastructure projects.
Some estimates list the Belt and Road Initiative as one of the largest infrastructure and investment projects in history, covering more than 68 countries, including 65% of the world’s population and 40% of the global gross domestic product.
Examples of the Belt and Road Initiative projects include infrastructure investments in ports, skyscrapers, railroads, roads, airports, dams, and railroad tunnels.
China and partner countries have a wide range of goals, but from China’s perspective, they’d like to see the development of the Renminbi as a currency of international transactions and to strengthen diplomatic ties worldwide. These linkages will create new markets for Chinese products, and integrate commodities-rich countries more closely into the Chinese economy.
Some countries, especially in the West, view the project critically because of possible Chinese influence, but others point to the creation of a new global growth engine by linking Asia, Europe, and Africa closer together.
Since the BRI’s inception in 2013, China’s two main policy banks — the China Development Bank and the Export-Import Bank of China — have loaned an estimated $282 billion to partner countries to build new infrastructure.
This raises the fear, particularly in Western countries, that perhaps if these countries are unable to manage their debt burden –– in other words, they are unable to pay back the money they borrowed –– they will become vulnerable to Chinese soft power. Some critics say that this is so-called “debt-trap diplomacy” is one of China’s goals. On the other hand, partner countries dispute this accusation, and they say that these loans are a boost that will help them modernize their economy.
It really depends on how you look at it, and since there are so many projects and countries involved, that it is difficult to generalize.
In fact, there is also the argument that by lending so much money, China runs the risk of falling into a creditor trap if some countries are unable to pay back their loans, leaving Chinese banks with an unfinished project and an uncertain future. Afghanistan is one recent example of this.
But, there is one thing for certain. The participation of China in the international construction business is now booming. China now has 27 firms among the top 100 global construction contractors, up from only nine in 2000, Europe has 37, down from 41. The U.S. now has only seven, compared to 19 construction contractors in the global top 100.