Eye on China: BRF Outcomes – Masood Azhar’s Listing – Debt-Trap Debate – Trade Deal Endgame – AI Ethics

Eye on China is a weekly bulletin offering news and analysis related to the Middle Kingdom. This week we cover all the details from the second Belt and Road Forum; the listing of Masood Azhar by the UNSC Sanctions Committee 1267; updates on the Sino-US trade war; a new report on surveillance in Xinjiang; the 100th anniversary of the May 4 Movement and much more.

I. BRF Outcomes

The second Belt and Road Forum ended over the weekend. Here’s a round-up of the major outcomes that emerged from the forum.

  1. Joint Communique:The leaders in attendance signed on to a joint communique. The salient points of the document are as follows:
  • “The world economy is facing both expanding opportunities and rising challenges, complicated by profound and rapid changes in the world. We reaffirm that strengthening multilateralism remains essential in addressing global challenges.”
  • A linked point to the above is this: “We support a universal, rules-based, open, transparent and non-discriminatory multilateral trading system with WTO at its core.”
  • “Looking into the future, we envisage high-quality Belt and Road cooperation…Such cooperation will be based on extensive consultation, joint efforts, shared and mutual benefits…Such cooperation will be open, green and clean.”
  • The document has sections on building policy synergy, boosting infrastructure connectivity, promoting sustainable development, practical cooperation and people-to-people exchanges.
  • The document also has a list of connectivity corridors under BRI, with the Bangladesh-China-India-Myanmar corridor not being listed.
  1. 283 Deliverables:Following the forum, official media put outa list of what was achieved during the three days. This includes “283 concrete results in six categories, namely, initiatives proposed or launched by the Chinese side, bilateral and multilateral documents signed during or immediately before the second BRF, multilateral cooperation mechanisms under the BRF framework, investment projects and project lists, financing projects, and projects by local authorities and enterprises.” Scanning through it gives one a broad sense of what BRI has grown to become beyond simply infrastructure projects. For instance, there are scholarships for students and researchers; projects to combat climate change; treaties on taxation; protection of cultural properties; pacts to cooperate in the agriculture sector and something called the Cooperation Initiative on Silk Road of Innovation. A lot of the focus this year has been on ensuring a green and sustainable BRI. In this context, a number of international and Chinese institutions have launched the Belt and Road Initiative International Green Development Coalition. There’s also a new Belt and Road Sustainable Cities Alliance.
  2. Deals Inked:The big number emerging from the forum was $64 billion. Xi said that prior to BRF deals worth that amount had been inked. However, no new investment figures were announced. Reuters reports that “data from Refinitiv shows the total value of projects in the scheme stands at $3.67 trillion, spanning countries in Asia, Europe, Africa, Oceania and South America.” Meanwhile, some other key outcomes include an increased focus on connectivity corridors with Nepal and the inking of a protocol to allow Nepal access to seaports at Tianjin, Shenzhen, Lianyungang and Zhanjiang and road and rail facilities at Lanzhou, Lhasa and Shigatse for third-country imports. Pakistan Prime Minister Imran Khan was in attendance at the forum in Beijing. He met with the Chinese leadership, with the two sides announcing agreements on the upgradation of a Karachi-Peshawar railway line, the second phase of the Free Trade Agreement between the two countries, the establishment of a dry port at Havelian city in Khyber Pakhtunkhwa and cooperation in space science and exploration. Another key agreement to note is the $666 million deal to build a data center in a tech city and a highway near the Kenyan capital Nairobi. Reuters reports that the funding will consist of loans at low interest rates and partnerships with private firms, with Huawei playing a leading role. China and Serbia also inked a number of deals, including the building of roads, railways and a new metro system in Belgrade. Finally, Singapore and China inked cooperation agreements covering six areas, including financial services, technology and innovation, ease of doing business, urban governance, and people-to-people exchanges.
  3. Debt Sustainability or Trap:As promised, China’s Ministry of Finance published a debt sustainability framework at the forum. The framework is “based on the IMF/World Bank Debt Sustainability Framework for Low Income Countries, as well as the national conditions and development stages of BRI countries.” It’s aim is to “promote sustainable economic and social development of BRI countries while ensuring debt sustainability.” The document provides the methodology for assessing debt distress. The goal is to produce a “final assessment on the risk of external debt distress and on the overall risk of debt distress.”

The document further states that “A final rating of the risk of external debt distress can be described as low, moderate, high or ‘in debt distress’.” Further qualifications are provided for assessing whether a country is “in debt distress.” But here’s the bit that I’ve found most important: “In general, a country rated at “low risk” or “moderate risk” means that the debt is sustainable. However, it should be noted that an assessment for a country as “high risk” of debt distress, or even “in debt distress,” does not automatically mean that debt is unsustainable in a forward-looking sense.”

All of this, of course, comes amid increasing arguments over whether China is practicing so-called debt-trap diplomacy via BRI. There’s been some pushback against this notion from a number of analysts this week. Deborah Brautigam from Johns Hopkins University argued in this NYT piece that “There certainly are problems with China’s approach to overseas lending. For one thing, Chinese banks still rely too heavily on Chinese construction companies to find and develop B.R.I. projects. Deals are often struck without any open tenders, creating opportunities for cronyism and kickbacks, and lending credence to accusations that projects bankrolled by China are sometimes overpriced. But the idea that the Chinese government is doling out debt strategically, for its benefit, isn’t supported by the facts.” Along with this, a new assessment by researchers at Rhodium Group argues that the debt-trap narrative isn’t supported by data. The study reviews 40 cases of China’s external debt renegotiations over a number of years. It concludes that asset seizures are rare and China’s leverage in such negotiations is actually quite limited.

My Thought Bubble: To me, the assessment doesn’t really debunk the logic of debt being a strategic asset for Beijing. All it does is tell us that China is learning and adapting its approaches taking into account concerns of partners. Implicit in that are two other facts: BRI partner states have agency and BRI is driven by multiple actors pursuing a myriad of interests as opposed to a grand plan minutely managed through Xi’s office. The BRI story is more complex and that’s true. But on debt, we need to think of it from a broader perspective than merely write-offs, extensions and so on. Think of it as a tool to shape political and diplomatic outcomes along with the debtor’s strategic options.

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