The Belt and Road Guard Rail

Who ensures environmental and social standards in China's grand plan?

When Chinese President Xi Jinping first announced the Belt and Road Initiative (BRI) in 2013 it was presented as the ultimate global infrastructure investment project. It would connect China to Asia and beyond through the development of road, rail and port, increasing Chinese trade and injecting financial opportunity throughout the region.

In the years since its scope has expanded to fund not just infrastructure but a diverse range of projects, such as fashion shows and theme parks. It’s attracted expressions of interest from more than a hundred countries across the world, many with only tenuous links to China and Asia.

“From China’s perspective many aspects of the BRI are a resounding success, as it has not only generated income and activity for China’s vast workforce, but a tremendous amount of development and good will in developing countries, particularly in the Asia Pacific,” says Dr Brooke Wilmsen, a human geographer from La Trobe University.

By mid 2018 China had already spent an estimated $400 billion on BRI projects. Some, like the enormous pan-Asia high speed rail line are of clear benefit to China, costing $6.7 billion as it connects China to Singapore through Laos, Myanmar, Thailand, Malaysia and Singapore.

Other projects are reportedly aimed at demonstrating China’s commitment to development in smaller countries, like the Sinamalé Bridge (originally the China-Maldives Friendship Bridge) is a 2.1km bridge linking three islands of the Maldives: Malé, Hulhulé and Hulhumalé. It is the first inter-island bridge in the Maldives, costing an estimated US$210 million and contributing to the country’s vast debt to China.

“Many infrastructure projects that are funded by the BRI would have struggled to achieve finance otherwise,” says Dr Wilmsen. “While this is initially good for the recipient country it can leave them financially vulnerable to debt stress when making repayments, leading to accusations of China employing ‘debt trap diplomacy’.”

“The vast majority of BRI projects are financed by banks owned by the Chinese government, and executed by Chinese companies in recipient countries. They’re granted with a ‘hands off’ approach, deferring to host-country’s laws and regulations, and in many cases the enforcement of these are severely lacking.”

Dr Wilmsen has been analysing the environmental and social risks of BRI projects, and the geopolitical implications they present. She believes that China’s non-interference policy when managing BRI projects has placed a number of countries in precarious positions.

“The BRI has funded significant projects with little evaluation or checks and balances,“ says Dr Wilmsen. “For the countries receiving this funding it can lead to forced displacement of populations for infrastructure projects, or significant environmental damage.”

There is growing interest in the hard power implications of the BRI. In early 2018, for example, the Australian government expressed concern about the high level of debt some Pacific Island countries have incurred to the Chinese government, which could generate financial crises and political turmoil.

“We’ve seen instances of violent protests, political turmoil and financial crisis brought on by projects funded under the BRI. This can have a negative impact on China’s reputation, and ultimately be a detriment to their geopolitical and geo-financial ambitions.”

China has invested heavily in its legal infrastructure to raise the environmental and social protection standards of Chinese firms, and domestically there has been an improvement in laws and agencies in this area.

“Some have argued that the BRI paves the way for China to export its dirtiest industries abroad, and in this way is following in the footsteps of many other economies,” says Dr Wilmsen. “While Chinese banks and firms are developing their own corporate social responsibility (CSR) policies, the concept is mostly in its infancy and the managers responsible often regard it as a public relations exercise.”

Dr Wilmsen’s analysis is part of an edited volume The Belt and Road Initiative and the Future of Regional Order in the Indo-Pacific published by Lexington Books. She collaborated with Andrew van Hulten, Xiao Han and David Adjartey.

“Two key findings came out of our analysis. The first is that China has the capacity to rapidly raise environmental and social standards, but that will largely depend on the success of existing projects and the response of other countries to China’s growing influence in Asia and the Pacific,” says Dr Wilmsen.

“Secondly, China has gone to great lengths to ensure its ability to manoeuvre. It has created a multitude of mechanisms through which it can fund BRI projects, all which entail different environmental and social standards. Thus, China can choose to fund volatile projects and keep the country at arm's length, or co-finance with other countries.”

An example of these projects is in Pakistan, where the World Bank and Silk Road Fund are co-financing a hydropower project built by Three Gorges Company, a Chinese state-owned hydropower firm. China has invested more than $30 billion in Pakistan through the BRI, more than any other country

“Such a deal will need to comply with environmental and social safeguard policies dictated by the World Bank,” says Dr Wilmsen. “Chinese banks and firms will need to learn these policies as well as those of other partner organisations, which can be beneficial for their global reputation in the long run.”