Sino Strategies: China's Influence & its Implications for the U.S.

This year, China’s Belt and Road Initiative (BRI) is celebrating ten years since its adoption in 2013 by the Chinese government. As part of the celebration, Beijing hosted the third Belt and Road Forum for International Cooperation from October 17th to 18th under the theme “High-quality Belt and Road Cooperation: Together for Common Development and Prosperity.” President Xi Jinping attended the opening ceremony of the forum, where he delivered a keynote speech and hosted bilateral events for attending guests. 

Xi Jinping does not appear to have any plans to slow down infrastructure development or international investment. BRI will continue to have an important presence on the global stage in the next ten years, even if there are non-trivial challenges that must be addressed to ensure BRI’s sustainability. This article takes a closer look at China’s Belt and Road Initiative and considers how U.S. policymakers, businesses, and consumers could be impacted by and plan for future developments along the Belt and Road.

BRI at 10 Years Old

The BRI is a global infrastructure development strategy led by the Chinese government. It involves investment in over 150 countries and organizations through two components. The first is the “Belt,” a stand-in for the Silk Road Economic Belt, which refers to overland routes for road and rail transportation throughout landlocked Central Asia. The second is the “Road,” in reference to the 21st Century Maritime Silk Road, which corresponds to maritime routes throughout the Indo-Pacific. The BRI runs through regions in Asia, Europe, Africa, and even reaches as far as Latin America.

The BRI is a signature and central component of Xi Jinping’s foreign policy plan. The initiative was first proposed by President Xi in 2013 during his visit to countries in Central and Southeast Asia. Xi listed the priorities and objectives of BRI as the development of transportation infrastructure, easier trade and investment, financial and policy cooperation, and cultural exchange between participating nations. Beijing also adopted BRI in hopes that it would support China’s domestic economy, redirect trade and investment away from the West to further boost China’s growth, and offer a means to gain political clout and military expansion overseas. 

Funding for the BRI is provided primarily by the Asian Infrastructure Investment Bank, a Chinese-run multilateral development bank established in 2016, and the Silk Road Fund, a $40 billion development fund established in 2014 to finance Belt and Road projects. Over $1 trillion has been invested into the initiative since its inception, enabling the funding and construction of roads, power plants, ports, railways, and digital infrastructure. However, based on various sources, annual investment needed to accomplish the BRI’s objectives range between $3 trillion and $6 trillion per year.

Since its inception, the BRI has made significant contributions to global development, but it has also experienced significant setbacks. The World Bank estimates that BRI transport projects could reduce travel times along corridor countries by 12%, increase trade by up to 9%, increase income by over 3% and lift over 7 million people out of extreme poverty. However, Italy has not gotten the expected results from participation in BRI. Additionally, some member governments have been unable to pay back loans that they received from Chinese development banks for BRI projects. That has led to allegations that China was engaging in “debt trap” diplomacy: making loans they knew governments would default on, allowing Beijing to eventually seize control of the assets as collateral. This is what the U.S. accused China of doing for the Hambantota port project in Sri Lanka. 

The Next 10 Years of BRI

High-level officials from around the world attended the third BRI summit, including  UN Secretary-General Antonio Guterres, Russian President Vladimir Putin – which marks Putin’s first trip outside the former Soviet Union since the  International Criminal Court issued a warrant for him in March – Hungarian Prime Minister Viktor Orban, and the Taliban government, which expressed interest in formally joining the BRI. Politics will continue to play an important role in the BRI’s development going forward. 

Coming out of the Summit, participants walked away with a set of Multilateral Cooperation Deliverables outlining the BRI’s priorities and goals going forward. One of the key themes of the deliverables is a focus on smaller, climate-friendly investment projects, as evidenced by the establishment of the Global Sustainable Transport Innovation Alliance, the Green Investment and Finance Partnership (GIFP), and the Beijing Initiative for Belt and Road Green Development all coming out of the high-level forum. During the summit, Xi Jinping also urged member nations to “remain steadfast in [their] commitment to cooperation and common development [in order to] accomplish new feats in high-quality Belt and Road cooperation that reflect the spirit of the times and will create a better future for humanity.” 

In spite of these promises for BRI, Beijing and member nations will have to develop a more robust and sustainable solution to fund projects. The world’s development needs will continue to grow, and China hopes for member states to be increasingly committed to – and, therefore, to an extent, dependent on – BRI for infrastructure in transportation, energy, and telecommunications, to name a few. 

Implications for the U.S.

1. U.S. Policy Implications

The U.S. could consider accelerating and consolidating its own intercontinental infrastructure plans to counter the BRI. The U.S. has co-developed two infrastructure plans to compete with Beijing. The first is the Partnership for Global Infrastructure and Investment (PGII), which is President Biden and the G7 nations’ flagship infrastructure initiative. The second is the India-Middle East-Europe Economic Corridor (IMEC), which seeks to foster connectivity and economic integration between Asia, the Persian Gulf and Europe. PGII has already mobilized $30 billion in grants and is supporting development of the Lobito Corridor connecting southern Democratic Republic of the Congo and northwestern Zambia to regional and global trade markets via the Port of Lobito in Angola. By consolidating its investment and infrastructure strategy around these two initiatives, the U.S. could develop a competitive alternative to the BRI.

It could be especially powerful for the U.S. to align with international organizations and multilateral institutions to develop its intercontinental infrastructure initiative. For instance, the U.S. could consider working more closely with the Quad and ASEAN in the Indo-Pacific on maritime trade routes, the African and European Unions on land-based transportation, and NATO and the UN on economic development and financing. Leveraging existing institutions could accelerate the U.S.’s ability to compete with the BRI.

2. U.S. Business Implications

Supply chains may become more and more dominated by Chinese players or Chinese collaborators as a result of BRI expansion and development. Companies will have to take this into account and either plan to work with BRI members (and whatever else that may entail in the future) or develop strategies to collaborate more closely with non-BRI countries and regions. 

The U.S. and other Western nations and organizations are collaborating to develop an infrastructure initiative to counter the BRI. U.S. companies could consider supporting or participating in the development and enhancement of infrastructure initiatives such as IMEC or PGII. By supporting this development, U.S. firms could receive reduced transaction fees or government incentives for specific business functions. Companies would also gain access to a well-connected customer base by driving the development or enhancement of an economic infrastructure corridor.

Companies could also consider setting up dedicated teams for monitoring the BRI. These teams could focus on understanding the structure, plans, and potential impact of the BRI, as well as closely following BRI developments as they occur. Such dedicated teams could enable companies to better understand the BRI from commercial, economic, and political viewpoints as new projects are announced. 

3. U.S. Consumer Implications

The BRI is largely part of China’s global strategy to increase its sphere of influence. U.S. consumers have an important role to play in competing with China’s BRI. By choosing to support U.S. and Western businesses and by supporting government decisions that promote national security and economic development, consumers can support U.S. competition with Beijing and ensure that the global economy does not end up confined along One Belt and One Road.