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Friday, 26 April 2019

China At The Crossroads Of "Silk Roads"

Chinese President Xi Jinping is expected to play the VRP of his new "Silk Roads", criticized from all sides, for the second summit, which kicked off Thursday, devoted to this vast investment program.

Then did not all come. Some 30 heads of state honoured the invitation of Chinese President Xi Jinping to participate in the second summit of the "Silk Roads", which opened Thursday, April 25 in Beijing and must last three days. But countries like Spain, Turkey, Sri Lanka or Argentina have preferred to abstain, while they attended the first edition, in 2017, of this great rally to the glory of the vast program of investment in infrastructure outside China.

These absences illustrate the growing reluctance of some countries to use the "Silk Roads" initiated by Xi Jinping in 2013 and which are provoking a growing number of controversies as the Chinese program ramps up. "The major stake of this forum for the Chinese president is to defuse the critics so that they do not question the durability of a project which proves to be, today, more important than ever for China", summarizes Jean-François Dufour, a specialist in the Chinese economy and director of the consultancy firm DCA Chine-Analyze, contacted by France 24.

After sales service

The Chinese economy is indeed facing a double challenge: its growth is slowing down and the "made in China" is exported less well in the United States - the first outlet for Chinese products - because of the trade dispute with Washington. The "Silk Roads" provide a solution to these two problems since they "offer outlets for Chinese companies in other countries where they participate in the construction of infrastructure financed by Chinese loans. growth outside China where activity has slowed down, "explains Jean-François Dufour.

Xi Jinping must, therefore, ensure the after-sales service of its ambitious investment plan during the three days of the summit under penalty of endangering the economic health of his country. A difficult task as the critics are numerous. The main criticism addressed to Beijing is that it buries the recipient country of its loans under a mountain of debts ... and puts it under its economic cut.

The misadventures of Sri Lanka in 2017 are often invoked to denounce this form of economic imperialism that China would be guilty of. By the early 2000s, Colombo had received $8 billion in Chinese loans to develop infrastructure, including a port in Hambantota (south of the island), which the government was unable to repay. To erase their slate, the Sri Lankan authorities have agreed to grant Beijing a 99-year concession for the operation of the new port - which has become a fact in Chinese enclave on the island. But Sri Lanka is not the only example. Ethiopia and Malaysia also had to renegotiate the terms of their loans to avoid defaulting.

Geopolitical weapon?

Beyond the debt problem, several countries have also denounced the opacity of the Chinese financing conditions. "Nepal and Pakistan decided, in 2018, to suspend some projects with China, arguing that the terms of execution of the contract had proved too favourable for Chinese companies," says the Chinese consulting firm Belt and Road Advisory.

But critics are not just economic. Some critics of the Chinese initiative, starting with the Trump administration, believe that the "silk roads" are being used as a geopolitical weapon by Beijing to expand its sphere of influence. "When a port is built in Sri Lanka in the midst of the maritime influence of India, when Beijing aggressively invests in the port of Djibouti, a country that also hosts American and French military bases, or that China wants to participate in the development of the port of Haifa (Israel) which happens to be the place where the American military ships come to refuel priority in the Mediterranean Sea, it is natural to ask questions on the Chinese motivations ", underlines the circle of American reflection Brookings Institute in a recent analysis note .

Parade of Heads of State

Faced with this avalanche of controversies, Xi Jinping "will highlight some heads of state who came to the summit as so many guarantees the viability of the 'silk roads'," said Jean-Francois Dufour. As such, the Chinese president can congratulate himself for having succeeded in convincing Mahathir Mohamad, the Malaysian Prime Minister.

Malaysia has indeed been for several months one of the main thorns in the foot of the Chinese promoters of the Silk Roads. Shortly after his election in May 2018, Mahathir Mohamad decided to cancel a huge railway project for which the Chinese had advanced $20 billion. It was the most expensive site of the "Silk Roads" and the withdrawal of a neighbouring country from China, directly within its sphere of influence, sent a very negative signal to other countries likely to accept Beijing investments. Finally, a month before the summit, Xi Jinping managed to get the site back on track by agreeing to make concessions on repayment terms and on the participation of local companies. "The arrival of Mahathir Mohamad at the summit shows that China takes into account the expectations of its partners," says Jean-François Dufour.

The arrival of the Italian Prime Minister, Giuseppe Conte, whose country is the first major economic power to have officially joined in March 2019, the project of "Silk Roads" is the opportunity for Xi Jinping "to emphasize that his The program is also of interest to major economies, "says the French expert. Finally, the presence of Russian President Vladimir Putin should not go unnoticed. Although Moscow does not officially support the "Silk Roads", the fact that the Kremlin master makes the move indicates that Russia is ready to confront China with the United States to defend the Chinese project.

But Xi Jinping is also ready to acknowledge that China must do more to ease the fears of other countries. Beijing took advantage of the opening of the summit to say that from now on, Chinese banks would take more into account the level of indebtedness of countries that benefit from Chinese money. As Jean-François Dufour points out, Beijing has so far been willing to lend money "without worrying about whether the debtor country could payback".

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