China caught the world’s eyes with its high-profile global forum on the so-called Belt and Road Initiative in Beijing on 14-15 May 2017. The developmental blueprint, involving about 65 countries, seeks to push through a series of infrastructure and trade projects that boost global economic growth and connect the Asian, African, and European continents.
Chinese President Xi Jinping pledged the US $124 billion during the forum to establish China’s leading role in this new globalization effort.
Despite being touted by Chinese news outlets, following the forum censors began to block Chinese from commenting about the initiative on social media. A number of users had been expressing their skepticism about the gigantic international project at a time when China’s economy is struggling with overcapacity, soaring home prices, and inflated credit.
While many Tianya forum users echoed the above dream of surpassing the US and Europe in the global economic order through the Belt and Road Initiative, some in the comment thread pointed to the unresolved economic crisis at home.
Skepticism aside, many Chinese bloggers did discuss the initiative in a positive manner. For example, “Lucky Star No. 1”, writing on the online forum Tianya, explained in simple language how China could reset the global economic order and become a boss with the Belt and Road project (also called “One Belt, One Road”). A translation of his quote is as follows.
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The core of “One Belt, One Road” is to invest in the infrastructure of surrounding countries and turn them into suppliers of raw material and markets of our products. There’s huge economic gain generated from this leading role in the project and a reasonable return on the investment.
We can see that the investment is huge, the risk is huge, and the return is super huge. Only a super strong economic entity (a necessary condition) equipped with political and military power can take up the initiative. If you don’t have the economic power, the initial investment would drag you down…Likewise, if you don’t have political and military strength, and your fist is not hard enough, you can’t take up the project. History has proven that only the strong country has “friends”. If you are weak, someone can take over.
The strategy is to turn oneself into the boss of the global village rather than the worker.
China’s economic woes
While many Tianya forum users echoed the above dream of surpassing the US and Europe in the global economic order through the Belt and Road Initiative, some in the comment thread pointed to the unresolved economic crisis at home. In the course of writing this post, the comment thread was made inaccessible to unregistered members, perhaps a sign of how sensitive the topic is.
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One person wrote:
The only road leading to the fulfillment of the China’s dream is industrial upgrading, focusing on advanced technological products so that we can step out of the vicious circle of high energy consumption, serious pollution, and low return rate.
We haven’t solved the problems in China’s manufacturing sector. All the money is trapped in the property market, and the upgrading of the industry is going slow. Overseas developmental projects cannot solve the problem of domestic unemployment, please don’t keep boasting. Why does the US have to reduce taxes and develop a manufacturing sector? Are they fools? They are a step ahead. What we should be fearful of is that your competitor is stronger and works harder than you are.
Money has been frozen in the stock market, in the property market, ordinary people’s money is frozen and where else is the money for One Bell One Road coming from? Has the promise for free yuan exchange been fulfilled? If it keeps printing out money, how can free flow of yuan be possible?
Another user commented:
China’s economy is now “L-shaped”, the major reason is that it hasn’t upgraded its industries…
The only road leading to the fulfillment of the China’s dream is industrial upgrading, focusing on advanced technological products so that we can step out of the vicious circle of high energy consumption, serious pollution, and low return rate.
Unfortunately, we are still taking the path of infrastructure investment. Infrastructure development is saturated, resulting in rocket high debt domestically, then we draw a circle outside the country to export concrete [for construction]. Let’s not talk about the risk in investment, can we evolve into an advanced country with construction projects? … The most likely result of overseas construction investment in infrastructure is that — the project has empowered them to compete in the low-end manufacturing market. Those countries are poor and they have abundant labor. For example, Vietnam and Indonesia. When the time comes, your friends will become your enemies in the low-end market.
The Chinese government has said it is making advances in restructuring its outdated economic model and reducing overcapacity and leverage for years, but it seems apparent that China’s growth has still been driven by the property market boom.
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The initiative is expected to spend the US $5 trillion in the next five years alone, and in Asia, the investment will be up to the US $2.5 trillion over the next decade.
The Belt and Road Initiative could also complicate Beijing’s effort to stem capital outflow that has been weighing on the economy. Many netizens pointed to an official media outlet’s report written in 2015 that 90 percent of Chinese corporations investing overseas were losing money instead of making a profit. Quoting the report, Twitter user @szeyan1220 believed the foreign investment has been exploited by corrupt government officials to transfer huge amounts of their wealth offshore:
Wang Wenli, the deputy head of the China Economic and Trade Promotion Association, said, “Speaking overall, Chinese corporations’ overseas investment has been unsuccessful. China has around 20,000 corporations investing overseas and 90 percent of them have lost money.” If the majority of the overseas investment is losing money, why continue doing so? For money laundering purposes? To transfer assets overseas? One Belt One Road. Those who take the money find their road, and the money is taken away from ordinary people.
The huge investment and the continuous capital outflow will result in inflation, Chinese scholar Zhang Lifan told US government-funded news outlet Voice of America:
【章立凡：一带一路可能的弊端就是洗钱】国富民穷已经持续很多年了。社会分配严重不公导致两极分化严重。互联网上很多怨言，认为政府撒币撒出的都是纳税人的钱。这些钱应该用来解决全民医保。有许多学者发文质疑一带一路的可行性，评估它将可能产生的各种风险。我认为，可能会产生一些弊端，比方洗钱。 pic.twitter.com/MHeshN65Lo
— 美国之音中文网 (@VOAChinese) May 16, 2017
Zhang Lifan: The adverse effect of Belt and Road is spending money. For many years, the country is rich and people are poor. The unequal distribution of wealth has led to a very serious disparity problem. On the internet, people keep complaining that the money spent is from taxpayers and that the money should be used for health care. Many scholars question the viability of the Belt and Road and predict the various potential risks. My opinion is that it may result in spending money.
Zhang further clarified on Twitter what he meant by “spending money”:
我就是个看戏的，谈不上反对派。戏唱得太像春晚，俺就喝个倒彩。我指的洗钱不是中国持有美国国债，而是超发货币。权贵集团稀释了人民币，造成国内物价飞涨，社会两极分化。将巧取豪夺的财富换汇投资国外，或是注入加勒比离岸账户、巴拿马离岸公司、瑞士银行。这次一带一路，他们的洗钱机会又来了。 https://t.co/ezXDjleGfC
— 章立凡 (@zhanglifan) May 16, 2017
I am just an observer rather than an opponent [of the project]. The performance is too much like the annual spring festival gala [meaning too ideological] and I give a thumbs-down. When I mentioned “spending money” I am not referring to the US debt held by China but the excessive printing of yuan. The ruling elite bloc devalues yuan, resulting in inflation and disparity of the rich and poor. The wealth seized from people will be cashed out in foreign currency, invested overseas or deposited in some offshore bank accounts in Caribbean, Panama, and Switzerland. The Belt and Road Initiative has provided another opportunity for spending money.
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In fact, the initiative is expected to spend the US $5 trillion in the next five years alone, and in Asia, the investment will be up to the US $2.5 trillion over the next decade. Yet, by some estimates, over half the countries that have accepted Belt and Road projects have credit ratings below investment grade and the risk for bad debt is huge. While other countries can easily back down from the initiative, as the leader of the initiative, China will be the last to quit.
This story was first published in Global Voices.