China, through its ongoing One Belt/One Road Initiative, is increasingly challenging the US’ ability “to move freely in a business environment and across the oceans,” the retired vice admiral heading one of the nation’s top trade groups said. Speaking at the Center for Strategic and International Studies, retired Vice Adm. Andy Brown warned, “over time, our ability [to conduct maritime business in U.S.-flagged ships] has eroded immensely.”
Overall, the Belt Road Initiative has expanded its reach and scope beyond an Asian infrastructure development project, Jonathan Hillman, director of the center’s Reconnecting Asia Project, said. It helped Beijing merged economic, security goals, with heavy emphasis on maritime commerce and defense, with its worldwide diplomatic interests.
Expanding influence beyond Asia
Djibouti provides a leading example of China’s uses of the initiative to expand influence beyond Asia and South China Sea.
Judd Devermont, director of CSIS’ Africa Program, said 10,000 companies and a million Chinese nationals are in Africa. They had their ships on the Indian Ocean hijacked by pirates. Therefore, Beijing sees upgrading its initial port investment in Djibouti to a full-fledged naval station as a necessary move. The expansion “gives it new diplomatic advantages and security gains”. Also it gave more economic influence there and across the rest of Africa.
For a recipient nation, “the Chinese are the only ones to invest” in Djibouti. Certainly, they are interested in a “long-time partnership,” Devermont said, quoting Djibouti President Ismail Omar Guelleh. Guelleh said the US and Europe had not approached him when he signed an agreement with Beijing. The agreement allows the naval base, which is located near American and French facilities already there.
Connectivity bandwagon in Southeast Asia
When China looks at South Asia it sees opportunity in countries such as Sri Lanka or Bangladesh. They are a “connectivity bandwagon” for international trade – from transshipping automobiles to bunkering fuel for tankers and cargo carriers, Nilanthi Samaranayake, an analyst at CNA, said.
These nations, with the exception of India, view “China as one partner out of many” to develop infrastructure for economic growth. However, they have grown more cautious following Beijing’s takeover of a large port in southern Sri Lanka following a default on loan payments.
That takeover and the cancellation and suspension of US$23 billion worth of development projects in Malaysia caused China to revisit how it will do business under One Belt/One Road.
China is changing its business practices
Amy Searight, CSIS’ director of Southeast Asia program, said that “these deals seemed to be very lopsided”. The Chinese were particularly stung by accusations of “new colonialism” and “unequal treatment” when the contracts were scrubbed.
Also often dubbed “debt-trap diplomacy,” the contracts have the following drawbacks. High-interest rates; few job opportunities for local workers; large upfront payments to Chinese companies – both private and government-controlled; and corruption surrounding kickbacks to government officials.
“Beijing worried about the ‘contagion effect’” the accusations would have, leading to loss of business, she said. As a result, China has changed a number of its business practices. These include renegotiating loans and hiring more local workers, but not managers. It also is exercising more restraint before investing in questionable projects, as seen in the Sri Lankan port.
Even if China is evolving how it carries out the initiative, Searight said Beijing’s need for the policy is evident in Southeast Asia. For the Chinese, there is a “Malaccan dilemma” of having its energy supplies choked off in the Strait there. Hence, their interest in developing ports in Pakistan and Bangladesh and possibly Thailand to create other shipping options and take that risk off the table.
These Southeast Asian countries may not look to the US to build ports, highways, rail lines and airports. However, “they want the United States engaged securing freedom of navigation” and having a visible presence, including by its leaders at regional gatherings, Searight said.
Source: USNI News
