Written by Eram Ashraf.

Much has been said and written about China’s overseas investment projects in the Belt and Road Initiative (BRI) and China Pakistan Economic Corridor (CPEC). While most of it has been in the form of raising concerns and doubts, some have also spoken in their defence. Recently we have seen visible backtracking in deals by some governments on a few of these investment projects. Does this mean enthusiasm for Chinese investment has now diminished? Was it a bubble that has now burst? Should the Chinese government be worried? The short answer to all these questions is a resounding no. I believe what we are now witnessing is a maturation in negotiations by countries receiving investments from China. After the initial fanfare of opening up of Chinese coffers for investment projects overseas, these re-negotiations should be seen as the ‘settling down’ of business within BRI and CPEC. How much of these decisions have been impacted by the story of the Hambantota port in Sri Lanka may be difficult to quantify. Yet, they cannot be ignored. The inability of the newly elected Sri Lankan government to pay their debt dues to Chinese investors lead to the handing over of the port and surrounding land to the Chinese for ninety-nine years. This story may indeed have been a wake up call to other governments engaged in Chinese investments.

Considering Khan’s concern with reducing Pakistan’s debt and the austerity measures, a re-evaluation of deals within CPEC looks most likely.

Newly elected Governments

In post-election Malaysia, the newly appointed Prime Minister Mahathir Mohammed undertook a re-evaluation of government deals his predecessor had made with China under the BRI. After finding some of them wanting, he put a stop to some of them as part of Malaysia’s debt reducing measures. Infrastructure projects which were cancelled included the East Coast Rail link and two gas pipelines which had been awarded to Chinese state companies. However, projects such as the Forest City and Melaka Gateway, both worth billions of dollars, are still likely to go ahead as they involve private investors rather than governments. These re-negotiations should not be seen as evidence of the ‘shunning’ of Chinese investments by new governments but rather their attempt to take more benefit from them. As Prime Minister Mahathir explained Malaysia’s position vis à vis China, “how do we benefit from their wealth and their power? That’s what we are looking at now.”

The other country with a newly elected government which has been engaged in projects with China is Pakistan. CPEC has been touted by both China and Pakistan as a ‘win-win’ solution for Pakistan’s development. In his election victory speech, even before he was elected Prime Minister, Imran Khan praised China’s investment in Pakistan as a symbol of their faith in the country’s future. He has set up a specific CPEC related cabinet committee within economic affairs to review the work programme of all CPEC working groups. Moreover, in testament to the seriousness with which relations between both countries are being considered, unofficial statements to media on anything related to CPEC by government officials have been barred.

As a vocal critic of corruption, specially against the previous Prime Minister Nawaz Sharif and the way his government had selected routes for CPEC, there is belief that the new Prime Minister may put a halt to some projects. Considering Khan’s concern with reducing Pakistan’s debt and the austerity measures, a re-evaluation of deals within CPEC looks most likely. This would not be new as far as CPEC is concerned as the previous government in November last year had put a stop to the US$14 billion Diamer-Bhasha dam project due to funding issues. Therefore, any changes made to projects within CPEC considered not viable or in Pakistan’s interest should not be seen as a cause of consternation.

Zambia

A good case study for the new government in Pakistan, if they do decide to reconsider deals within CPEC, is Ching Kwan Lee’s ethnography of Chinese investments in Zambia’s copper mining and construction sectors: The Spectre of Global China: Politics, Labour, and Foreign investment in Africa. In it, she explains how China’s state-owned enterprise or SOE’s long term considerations for mineral resources and political influence in Zambia made them more sensitive to government and societal demands than multinational corporations. As a result, in the mining sector where Zambian elites had a clear long-term development agenda, they were able to pressure the SOEs in negotiations.

However, where that goal was missing, as in the construction sector, and short-term gains were given precedence over long term, the state suffered. One example was the ‘interest free loans’ given as assistance from Chinese banks for Zambian construction projects which carried such high charges and fees that they became equivalent to very high interest loans. In addition to the loans, an absence of open bidding in the application process resulted in inflated costs for projects as there was no competition.

It seems that while on paper it appeared the Zambian government had applied for loans for construction projects, in reality it was Chinese contractors already in Zambia who had arranged the entire deal with Chinese banks and then brought it forward to Zambian officials. As these deals could be approved within six months as compared to two years in the case of the World Bank, Zambian politicians who wanted speedy results for electoral gains welcomed them. It is insights such as these by Lee, regarding Chinese construction deals in Zambia, which prove most useful when studying construction projects within CPEC as they also involve Chinese loans and Chinese SOE’s.

According to Lee, in the mining sector, contrary to construction, Zambia was able to maximise benefits from Chinese SOE’s when both government and society created ‘political synergy’. If a state and its people work together for their country’s development, then they can determine a truly beneficial deal from Chinese state investments. In the case of CPEC, if Pakistan is to truly make a ‘win-win’ situation for its development, then both government and Pakistani society will need to work together. Transparency and accountability will be key. If this results in certain projects within CPEC being dropped or re-negotiated, then it should not be seen as a set-back to CPEC but rather its ‘settling down’.

Dr Eram Ashraf holds a PhD from Swansea University in International Relations with a focus on critical international security, social psychology and China. She is currently writing a book which looks at how China’s development/rise is being viewed by others. She tweets @eramash. Image credit: CC Wikimedia Commons.