By Jerry M. Rosenberg
While the U.S. is asleep, China plots its next move. Events following the insurrection on the Capitol; the wild spread of the Delta virus; concerns over the complex and challenging months awaiting President Biden have all consumed our government and our people. As we struggle to decipher the future, China has not patiently stood by, but instead has dug in to advance its cause to further dominate the western world. President Xi Jinping had done his homework and may have discovered in the history books how Adolph Hitler used the weaknesses of the U.S. and Europe resulting from the disastrous effects of the Great Depression to take steps to conquer all nations economically. He had invented his BRI.
Even with some EU nations resisting, Biden and his staff base their doctrine on the belief that China is “less interested in coexistence and more interested in dominance.” The President’s policy is to blunt China’s ambitions and will “fight” for its acceptance.
President Trump’s outgoing Director of National Intelligence John L. Ratcliffe issued a stark warning on December 3, 2020, that China was preparing for “an open-ended period of confrontation with the U.S. as “the greatest threat to America today” and to “democracy around the world since World War II.” Trump’s outgoing Secretary of State Mike Pompeo early in the year defined the Chinese Communist Party as the “central threat of our times.”
Their messages deal primarily with military advances especially in Asia and technological development by “stealing” from U.S. companies. Intellectual property theft did not directly deal with the considerable issues of trade and economic welfare.
Ratcliffe, in his op-ed Wall Street Journal article argued “This generation will be judged by its response to China’s efforts to reshape the world in its own image and replace America as the dominant superpower. Their intelligence is clear. Our response must be as well.”
Relations between the EU and China diplomats were first set in 1975. By 2003, the EU-China Comprehensive Strategic Partnership deepened their ties resulting in both parties becoming highly interdependent on each other. Both sides would jointly adopt the EU-China 2020 Strategic Agenda for Cooperation and on December 30, 2020 both parties announced a deal on the ambitious Comprehensive Agreement on Investment. In that year, the EU and China combined constituted 45 percent of global GDP.
Assuredly, a healthy and robust economy is wanted by the EU; as well as the U.S. By June 2020, China’s trade surplus rose 14 percent to $31.8 billion, while China’s surplus with the EU was $12.7 billion. Today, China is threatening everyone’s well-being and we must all be alert to its ambitions over the coming years. The endpoint of BRI indicates China’s wish to intensify relations with traditional U.S. allies in Europe, allowing China to become the “center of the world” leaving the U.S. marginalized.
The Belt and Road Initiative (BRI), also known as OBOR, is a central pillar of President Xi Jinping’s foreign policy. It is such a national priority that it is now mentioned in the country’s constitution. Nevertheless, huge problems for China remain. The NATO report of December 2020 offers a challenge to China. If the government “were to make the BRI less China-centric and more multilateral both in terms of project financing and economic benefits, and if it were to adapt internationally recognized lending and transparency standards while engaging in good development practices, the project might be more welcomed by an array of partner countries” argues Bee Boo Chun, Martin David and Ben Simpfendorfer in May 2020. This is a choice that China must make, and the direction it takes should ultimately condition Western responses.
America’s perception of BRI should be evaluated in terms of its broader rivalry with China. The need for relations with China continue to grow in spite of potential threats. China is an essential part of the production chain for many leading U.S. firms. It is also a highly consequential purchases of our official debt. As noted by the NATO December 15, 2020 document, “Were China to cease purchasing that debt, not only would the renminbi (China’s currency) dramatically appreciate, but U.S. interest rates would as well. This complex monetary relationship thus embodies a powerful admixture of rivalry, competition, and mutual interests.”
Europe’s concerns about the BRI have increased over the past few years, and further exacerbated during the Covid and Delta period, with an increasing dependence on China for a range of strategic items. In October 2018, the European Commission for the first-time declared China’s growing economic leverage and strategic intent of its investment strategy had to be more carefully monitored. Etienne Soula Brattberg, sponsored by the Carnegie Endowment for International Peace wrote in 2018 that given the extraordinary amount of resources China is throwing into the BRI and the kind of economic activity this level of cash can generate, it is hardly surprising that European governments have a complex view of the initiative and no obvious unified response to it. “For Europe, as for the United States, the BRI poses a challenge to an open, global, rules-based liberal trading order that both have long championed and understood to be in their interest. China is clearly holding up a different, more patently statist and transactional model.”
NATO’s Parliamentary Assembly’s December 15, 2020 reported on BRI noting that “China has not allowed Covid-19 pandemic to diminish its ambitions for the BRI (and in some respects has seen the epidemic as creating some opportunities on the diplomatic front).” Beijing continues to declare that BRI heralded its own model of political and economic development. Noted by David O. Shullman on March 31, 2020 “China’s leadership believes its authoritarian model could become more attractive as the challenge of the pandemic and its economic fall-out intensifies.”
NATO firmly believes that “there is a link here with China’s ambitions for the BRI. China is not simply seeking to deepen trade links by building infrastructure to facilitate these ambitions, it clearly sees itself as the new center of gravity in the coming international system. Beijing is accordingly holding out a particular model of political life and inter-state relations to hasten this rise, and the BRI is integral to the image it seeks to project.”
The realities show that the Covid-19 and Delt pandemic have dramatically struck at international trade and investment flows globally while the United States has imposed a widening range of trade and investment sanctions on China for security purposes and to protect domestic industries. The U.S. assumes that post pandemic, resulting from structural and political impacts could well emerge to either reduce trade flows globally or reorient trade away from China. The high-risk assumption is that Europe, Canada and the United States will reduce their “overreliance on the Chinese manufacture of an array of strategic products.”
Should international trade flatten the BRI, it could become a source of climbing debt for Chinese firms and their local partners, declares Felix Chang writing in the Foreign Policy Research Initiative.
Nevertheless, the record shows that the last decade has been a boom for China, the world’s largest manufacturing. By November 2020, China reported a record trade surplus of US$75.43 billion, propelled by an unexpected 21.1 percent surge in exports compared with the same month one year earlier, leading the jump were exports to the United States which climbed 46.1 percent to US$51.98 billion, also a record.
Yet, not all is going well for China’s government. Economic growth has slowed, and the young are increasingly unable to find work. Affordable housing is disappearing and the gap between the wealthy and poor increases. According to Li Yan, reporting in the New York Times on July 10th, about 600 million Chinese, or 43 percent of the population, earn only $150 a month. Wages are stagnant, and young people talk about a “consumption downgrade” as they work as what is described as “wage slaves.”
In the 21st century, the global economy is in flux as United States’ influence is apparently in decline. China, in its constant pursuit to replace the U.S. as the global hegemon now has a legitimate use to apply the term “Marshall Plan of Beijing”, its BRI, as its extends its reach far and wide. Should this happen, then the EU could theoretically turn away from the U.S. thus denying itself from receiving any New Marshall Plan funds, thereby creating increased tensions between the two historically allied groups.
A problem for the European Union, and this is where the U.S. can be of enormous help, is that the European Commission does not have the financial clout to push the private sector to align with its own policies. Thus, both Europe and the United States will be significantly challenged to match China’s capacity. It will have to work more in concert by offering alternative solution for linking regions to the world economy. Unlike China’s strategy and ideology, the EU and U.S. will have to link together based on “liberal internationalist principles of free market, the rule of law, good governance, and transparency.”
Like the U.S. Marshall Plan, BRI seeks to mobilize public and private investment in partner countries, albeit with a singular focus on large infrastructure projects, and it is linked to China’s own economic upgrading by creating footholds in external markets for its capital goods and hi-tech products. The BRI and the Marshall Plan were adopted at times when the global system was dysfunctional, called by experts as a “market failure” or “disequilibrium.” More practical specialists refer to a “global power vacuum” with “hegemonic opportunities.” In other words, the total chaos in Europe following WWII and the Global Crisis of 2007, “prolonged global economic stagnation.”
The BRI plan is development-oriented, more geographically dispersed and has no specified end date. Also, financing consists largely of loans (Chinese bank lending in 2019 stood at US$ 2.6 trillion dollars), foreign direct investment and a smattering of grants. Lastly, given the limited institutional capacities in most BRI partner nations, China has operated bilaterally and has not created tailored coordinating institutions. By June 2021, China was the top trading partner for over 100 countries.
In addition, there are significant risks to nations borrowing from China. Chinese loans have been most attractive to nations that could not or preferred not to meet IMF or World Bank Standards for accounting and transparency. As described in NATO’s report “Some of the countries and entities accepting Chinese lending are default risks and some of the credit that has been extended is lent without due diligence and on terms that are potentially injurious to the borrowers.” Many specialists call China’s lending practices as ‘debt trap diplomacy.”
At noted, “Irresponsible lending and unchecked borrowing could leave countries so indebted to China that they could be forced to make unsavory concessions down the line on terms to which those who made the agreement would never have originally consented.” In addition, the greater China’s investment in Europe, the more vulnerable Europe becomes to Chinese espionage.
As claimed by Weizhen Tan, “If Chinese lending occurs but is unreported or even under reported, this can lead to underestimation of debt sustainability and be a factor in mispricing bond issues,” increasingly jeopardizing China’s financial reputation.
As reported on cable TV station CNBC in 2019, “Not surprisingly, both the IMF and World Bank have called for substantially more transparency on Chinese lending and greater disclosure of the terms on which its loans are being made.” Little has changed here.
BRI’s goal is to boost exports, export currency, counter a rival, foster strategic division, and siphon away diplomatic support.
Montenergro – A Case Study
Montenegro is a mountainous nation of 600,000 people and a member of NATO since 2017, hoping to join the EU shortly.
Initially, it was thought by most Europeans that it was a good idea for Montenegro to take a mammoth loan (US $1 billion) from China to construct a needed highway to their neighboring Serbia, primarily to increase tourism. It was designed to link the port of Bar on Montenegro’s Adriatic coast to its landlocked neighbor Serbia. In 2014, just prior to the creation of BRI, Podgorica, Montenegro’s capital officials contacted the China Road and Bridge Corporation (CRBC) for the construction of a highway to Serbia. Financing would be 809 million euros coming from the China Exim Bank, to finance 85 percent of the first section, at 2 percent interest over twenty years. Chinese workers were given 70 percent of the work. It road remains unfinished and the IMF estimates that the project, to complete would cost another $U.S. 1.2 billion.
Montenegro had borrowed US $944 million from China as part of its BRI agreement in 2014, to build a 25-mile stretch of road, which was dubbed the “Road to Nowhere.”
With this expense, Montenegro’s debt rose to nearly 80 percent of its GDP. “This Chinese investment could be really dangerous for Montenegro and nobody is thinking much about that in our country,” said Milka Tadic Mijovic, director of the Podgorica – based Center for Investigative Reporting. Soon after, realizing the financial burden to its country, the government asked the European Union to bail them out of the debt. The EU at that time said NO!
Back in 2018, Montenegro was listed as one of eight countries at an increasing “risk of debt distress” by the Washington-based think tank Center for Global Development. However, the EU may still aid Montenegro by offering small grants and preferential loans from the European Investment Bank to reimburse loans from Chinese banks. Some Brussel diplomats and influential EU member states worry that China is attempting to use the so-called “16+1” format as a Trojan horse to divide the EU and weaken the vulnerable Balkan nations.
Should Montenegro default on its loans, China can take over assets pledged as collateral. This can include “things from giving up coal mines to ports to even land of Montenegro to the Chinese government.” The result, Podgorica could lose control over its own economy.
Economically weak countries, including Montenegro, were offered loans by China demanding loyalty. The loan was due in the summer 2021. The contract was padded with extra cash for corrupt officials. According to the Washington Post’s Michael Birnbaum, the highway costs nearly $40 million each mile, “China has built ties directly into the European Union through its Belt and Road Initiative, which tries to smooth ways for Chinese exports, and through other cooperation efforts that have poured Chinese development money into European infrastructure projects.
The borrowing temptation was attractive, “China has been filling any opening it felt it could,” said Vuk Vuksanovic, a researcher at the Belgrade Center for Security Policy, a Serbian think tank. The Chinese were willing to go places where Western institutions were not.
Montenegro, must secure a deal to either swap or refinance with the European and U.S. banks, for nearly $1 billion in debt owed to China; and hopes to reduce the interest rate on the debt to less than one percent.
Cuba turns to China and the BRI – The Making of the New Cold War
Chinese first came to Cuba in significant numbers in the late 1850s to toil in Cuba’s sugarcane fields, when the small island was the largest producer of sugar in the world.
In the capital of Cuba, Chinese residents established “El Barrio Chino” or Chinatown of 44 square blocks and was once the largest such community in Latin America. China played a major role in the financing and construction of the ALBA-1 undersea cable in 2011, connecting Cuba to Venezuela and Jamaica. (Cuba also looks to China to help maintain its level of military equipment, to replace aging Soviet-era technology.)
A lack of food and medicine led to anti-government protests in Cuba beginning on July 11, 2021. Cuba remains one of the nations in the Western Hemisphere with the lowest level of internet connectivity. This was an unexpected explosion of discontent not witnessed in nearly 30 years. A series of internet outages coincided with the protests. Since the internet was introduced in the country, the Chinese government has used its vast powers to control it digital spaces and censure outline speech.
The President of Cuba Miguel Diaz-Canel would blame the United States for restricting exports, access to funds and travel to Cuba, all leading to widespread shortages. (The average person struggles to get by on inadequate state salaries, the equivalent of US$20 a month). The street discord, according to the Cuban government, was brought on by U.S. “economic asphyxiation.”
Cuba, Latin America’s oldest dictatorship, had a long relationship with Russia until the early 1990s; next with Venezuela. With a dip in crude imports from a collapsing Venezuela, the Cuban economy went into a free-fall. China would enter into a long-term partnership with Cuba.
China is now the island’s second largest trading partner, after Canada, and its single largest source of technical assistance. Havana contends that China is the island’s main source of investment from Asia. Havana signed up for the BRI in 2018 during Diaz-Canel’s first visit abroad following his taking over from former President Raul Castro. Xi Jinping wrote “I have the willingness to maintain close communications with you (Raul Castro, the first secretary of the Communist Party) as together we write a new chapter of Chinese-Cuban friendship in the new era.” Havana in its desperation to attract U.S.$2.5 billion a year in direct foreign investment would accept China’s loan policies and use BRI to further dominate the economy in Cuba.
Joining BRI, Cuba, enduring a five-year-long economic contraction, anticipated that it would be a boom to its troubled economy.” We hope to get involved in this project in the most committed way possible, and that this means the Chinese business sector participates more actively in the process of updating our economic model,” Orlando Hernandez, president of Cuba’s Chamber of Commerce said of the BRI. It appeared to be an act of desperation.
China would become a major, if not only, source of growth for this nation of 11 million people. The first computer assembly plant was opened in 2017 by Haier. Drug manufacturing for the treatment of Covid-19 was supported by Chinese firms and provided Cuba with over 80 tons of medical supplies to keep hospitals operational. Havana would be helped by China in their transition from analog to digital television and the expansion of mobile broadband, led by Huawei, and the creation of an artificial intelligence center in Cuba. In the summer of 2020, Beijing donated Chinese-made trains to Cuba as a means of solving the problem of interprovincial transport on the island; more trains are planned. (In 2019, the Cuban’s boasted of a Made-in-China train connecting Havana to Santiago-the first new locomotive on the island in 40 years). China would also donate 5,000 solar panels to Cuba by May, 2021.
With a dip in crude imports from a collapsing Venezuela, the Cuban economy went into shock. It would rapidly strengthen ties with China and BRI. Beijing saw Cuba as the central gateway for spreading its influence throughout Latin America (Secretary of State Pompeo had now warned Latin American countries that they should be wary of dealing with China.)
Under BRI, a container port in the eastern city of Santiago de Cuba, was funded and developed by China Communication Company Ltd (CCCC) with a $120 million Chinese loan. It opened with great fanfare in 2020.
On September 23, Secretary of State Mike Pompeo announced the creation of the Cuba Prohibited Accommodations (CPA) list, which “includes 433 properties that are owned or controlled by the Cuban regime or certain well-connected insiders.” The list intended to discourage U.S. citizens from staying at hotels owned by the Cuban government and from “attending or organizing certain professional meeting or conferences in Cuba.” At the same time, the U.S. Treasury Department restricted imports of the world-loved “Cuba-origin alcohol and tobacco products.”
Within days China would attempt to bolster its ally Cuba. Pretenses of the phone call by Xi Jinping “to celebrate the 60th anniversary of the establishment of bilateral diplomatic relations” hid its true purpose “China and Cuba would stand together against the U.S. just as they did throughout the Cold War decades.” In a subsequent telephone call Xi Jinping congratulated Cuba’s involvement in the BRI. The circle of engagement and dependency was near complete.
The Institute for War and Peace reported in December 2020 that Etecsa, the sole company in Cuba that provides internet access has three primary technologies that are all Chinese-Huawei, TP-Link and ZTE. Newsweek reporterJ. Dutton noted that in 2017 the Open Observatory of Network Interference, a global internet censorship watchdog, found traces of Chinese codes in both the surface and the interfaces in Cuba. President Biden is rolling back Trump’s restriction and is returning to a Cuba policy based on engagement rather than isolation and embargo. While Cuba’s intensions appear not to increase relations with China, the protests on the street of Havana and elsewhere may alter this approach. The President and Secretary of State Blinken had a lot to ponder in coming up with a plan to retain the spread of China in Cuba.
China hacks Microsoft
Western allies and the Biden administration formally blamed China, on July 19th, 2021 for the massive breach of Microsoft Exchange email server software. In addition, the U.S. accused the government of working with criminal hackers in ransomware attacks and other cyber activities. Washington described these activities as part of a “pattern of irresponsible behavior in cyberspace.”
With millions of dollars involved, U.S. officials alleged that China’s Ministry of State Security has been using criminal contract hackers who have engaged in cyber extortion schemes and theft for their own profit. It is uncertain whether these attacks are related to the Chinese spread of BRI.
The cyber attack on Microsoft is believed to have begun at the beginning of 2021, infecting computers that secretly monitors systems belonging to small firms. In all, the hackers gained access to a huge amount of sensitive data for as many as 20,000 firms and hundreds of thousands of email servers.
Biden told reporters, “My understanding is that the Chinese government, not unlike the Russian government, is not doing this themselves, but are protecting those who are doing it. And maybe even accommodating them being able to do it.” Officials of the security and intelligence agencies described more than fifty techniques and procedures that “China state-sponsored actors” use against the U.S. network. The Chinese government had hired or quietly condoned criminal groups to carry out the incursion.
Secretary of State Antony Blinken said that China’s Ministry of State Security “has fostered an ecosystem of criminal contract hackers who carry out both state-sponsored activities and cybercrime for their own financial gain.” Chinese involvement in hiring criminal networks to invite and extort money around the world. Once inside of the Ministry, the Chinese hackers had free run of emails, other sensitive corporate data and intellectual property.
As defined by the New York Times, the EU and UK also got involved claiming malicious cyber activities with “significant effects” that targeted government institutions, political organizations and key industries in the bloc’s 27 member states could be linked to Chinese hackings groups. England’s National Cyber Security Centre said the groups targeted maritime industries and naval defense contractors in the U.S. and Europe and the Finnish parliament. EU’s foreign policy chief Josep Borrell Fontelles, stated that the hacking was “conducted from the territory of China for the purpose of intellectual property theft and espionage.”
Simultaneously, the U.S. Department of Justice charged four Chinese nationals – three security officials and one contract hacker – with targeting dozens of firms, universities and government agencies throughout the U.S. and overseas.
In addition, NATO, usually hesitant to make accusations against China, in its first public statement, condemned Beijing for hacking activities. The alliance said it was determined to “actively deter, defend against and counter the full spectrum of cyber threats.”
The Chinese Foreign Ministry would brush off such claims, that China “firmly opposed and combats cyber attack and cyber threats in all forms” and warned that attribution of cyberattacks should be based on evidence and not “groundless accusations.” In an attempt to show Biden that China shares America’s concerns, an official announced that “China is also a major victim of cyber attacks.”
The new strains would not end. Tensions between China and the U.S. continue to grow.
According to Shen and Chan, “Economic and financial considerations have been major concerns for China’s initiative.” The “rival” of China, they believe is that the U.S. is declining, at least economically. This explains why China has employed a liberal, “brave new world” political marketing strategy for BRI instead of Marshall’s confrontational “Soviet threat” strategy.
The Financial Times in 2015 described BRI “Like the Marshall Plan, the new Silk Road initiative looks designed to use economic treats as a way to address other vulnerabilities.” In the same year, BRI was referred to as “China’s Marshall Plan” by Bloomberg and described as the “Marshall Plan without a war.”
Today, NATO (North Atlantic Treaty Organization), its 30-member alliance and defender of the EU and beyond is now emphasizing needed attention on China. All along, China was the principal focus as a possible military threat; now it is also an economic one. According to the German Institute for International and Security Affairs (SWP), in its thoughtful and lengthy report, edited by Barbara Lippert and Volker Perthes, “At least for the United States, it can be said that strategic rivalry with China has edged out the ‘War on Terror’ paradigm that had prevailed since 2001,” remaining the “defining issue in international relations for some time to come.” China is using its economic influence to buy political leverage which strains NATO cohesion.
Without question, China sees itself emerging as a full technological competitor to the United States. Their third pillar of the BRI is the “Digital Silk Road”. DSR was announced at the first BRI forum in May 2017. According to Tin Hinane El Kadi, it includes laying undersea internet cables and delivering advanced IT infrastructure to BRI nations, including broadband networks, e-commerce hubs and smart cities.
NATO members will ultimately have to agree on a strategy for responding to the BRI challenge. But this is easier said than done, as many individual elements of the China’s program makes good commercial sense, while other dimensions can be understood as posing potential long-term strategic threats. In October 2019, Douglas J. Feith and Sahaul Corev, China’s global ambitions are a central concern of U.S. strategic planners, in particular, who recognize all of this as a direct challenge to the West.
Since 2017, China has been treated as a “long-term strategic competitor” in official U.S. government strategy documents. At the NATO London December 2019 meeting, in its London Declaration, The U.S. spoke for the first time of the challenges (and opportunities) presented by China’s influence and international policies, “China’s political elite is – rightly – convinced that the United States is seeking at the very least to prevent any further expansion of Chinese influence.” NATO has recognized that a collective response to the Chinese challenge is needed. In its final declaration it was noted by Secretary General Jens Stoltenberg that China had begun to invest heavily in European infrastructure and in digital architecture and that this too “poses potential risks.”
Some global analysts warn that Beijing’s goal is to increase the economic and strategic dependence of a range of countries on China. The BRI is on its way to meeting some of their objectives. The Council on Foreign Relations estimates that China has already spent 200 billion US dollars on BRI projects and Morgan Stanley predicts that number may grow to somewhere between 1.2 and 1.3 trillion dollars by 2027 as reported in 2019, by Andrew Chatzky and James McBride.
Warnings come from Daniel Kliman in The Center for a New American Society noted seven serious risks that for all BRI participants include “erosion of national sovereignty; lack of transparency; unsustainable financial burdens; disengagement from local economic needs; geopolitical risks; negative environmental impacts; and significant potential for corruption.”
A report “NATO 2030 – United for a New Era” was released on December 1, 2020, prepared by a group of so-called “wise persons” containing 138 proposals. The report was in part developed in response to the question of NATO’s purpose and relevance branded in 2019 by President Emmanuel Macron as “brain dead,” because of a lack of strategic coordination and American leadership.
NATO members are determined to build counterweights to China, by introducing connectivity initiative and other programs to forge broader linkages that are guided by a different set of values than those upheld by China. Ives, in 2019 and Packham and Barrett, also in 2019 are convinced that U.S. is explicitly seeking to counter-balance Chinese ambitions while urging its allies to embrace this effort.
As co-chair of the 10-member team of experts A. Wess Mitchell (a former U.S. assistant Secretary of State for Europe) told NATO ambassadors in a private briefing that the report showed that “NATO is alive and kicking both in its cerebral function and its muscle tissue.” Mitchell was reminding all that ten years earlier China was not even mentioned in their outdated goal of a decade earlier.
NATO’s Secretary-General Jens Stoltenberg said China’s rise posed “important challenges to our security.” Christian Tybring-Gjedde of Norway concluded “There are concerns that China is pursuing a divide and conquer strategy in Europe through the BRI. Europe has not achieved a significantly unified approach to this ambitious Chinese project. There are also risks of transatlantic tensions here as the United States government is deeply suspicious of the BRI and sees it more in geo-strategic than economic terms.”
NATO has turned its focus to China in a bid to adapt to changing global realities, according to Shannon Tiezzi of The Diplomat. She noted that NATO’s report began with a stark warning: “The scale of Chinese power and global reach poses acute challenges to open and democratic societies, particularly because of that country’s trajectory to greater authoritarian and an expansion of its territorial ambitions.” For Tiezzi, clearly China is increasingly viewed as a competitor, which represents a significant shift in the Alliance’s vision.
The report asks NATO allies to “uphold cohesion” while engaging with China bilaterally citing the Belt and Road Initiative. “No longer can NATO remain indifferent or removed from China’s BRI assertion to dominate the global economy.
Several leading Western governments as well as the European Commission are raising questions about existing commercial supply chains and whether these remain strategically viable as part of China’s increasingly aggressive posture. According to Thomas Linders and Roland Verstappen in 2020, in the West’s increasing concern about China’s aggressions and intentions, as to whether nations can count on China’s overall reliability.
Germany, leads the pack in resisting Biden’s overarching foreign-policy initiative to contain China. Chancellor Merkel, soon to be former chancellor, is fundamentally skeptical of the concept of decoupling from China in a globalized economy. She believes that Europe, and Germany in particular, must pursue its own China policy. Her clout could doom the support for the B3W plan and further distance the EU from the U.S.
NATO’s team headed by Chritian Tybring-Gjedde of Norway believes that any effort to counter the worst elements of China’s infrastructure programs will require significant capital injections and the burden may actually be greater on Europe than North America, as it holds a higher stake in these projects.
In April 2018, the German newspaper Handelsblatt reported that twenty-seven EU ambassadors out of twenty-eight signed a document denouncing the lack of reciprocity in infrastructure projects linked to the far-reaching Chinese development strategy Belt and Road Initiative (BRI). The document criticized the BRI as a means for Chinese attempts to shape globalization. The strategy runs counter to the EU agenda for liberalizing trade and to push “the balance of power in favor of subsidized Chinese firms.” Hungary was the only nation to decline signing. Why? In 2014, China created a Foreign Domestic Investment in Hungary that rose by 471 percent, an amount equaling almost 33 percent of total Chinese investments in central and eastern European countries. The result is a diplomatic bombshell across Europe indicating an apparent obligation of Hungary not to criticize China.
In its striving for a first rank position in globalization, China has signed free trade agreements around the world. In 2013, President Xi Jinping created its Five Principles of Peaceful Coexistence in the Belt and Road Initiative (BRI), a “binding strategy” to increase its outreach and influence, including with nations of the European Union. He had laid out China’s soaring global economic and strategic ambitions. Jinping appears to be “driven more by a Chinese vision of world order in which superiority is both means and end.” Jonathan E. Hillman of The Wall Street Journal wrote “Chinese leader Xi Jinping’s signature foreign-policy vision, the BRI, is actually poorly defined and horribly mismanaged. As China pushes ahead with this colossal infrastructure-building spree, it is following in the footsteps of past empires and seriously overreaching.”
Some global experts believe that this is an extension of China’s arm to promote “alternative models of governance.” Others claim that the government targets the U.S. as a potential competitor and offers a new world order. It is still to early to conclude that BRI is a significant threat to either the EU or United States. However, all institutions must be attentive before it is too late to counter the spreading tentacles of China.
BRI can be essentially understood a three inter-linked initiatives: The Silk Road Economic Belt, the Maritime Silk Road, and more recently the Digital Silk Road. The broad array of infrastructure projects include oil pipelines, roads, railways, and ports, as well as a host of industrial investments.
As early as April 2019, it became clear to many in Washington that a New Cold War had emerged between China and the U.S.; others would argue that we had dismissed China’s BRI as a strategic mistake. Several Capitol foreign policy experts argued that there is a compelling need to be smart about when to engage and when to resist engaging, stated Philip H. Gordon and James Steinberg, in Foreign Policy, on July 29, 2020. (On October 28, 2020 Foreign Policy News published my article The Threat of China’s BRI to EU and US, questioning “Will the United States surrender its long-standing and earned reputation of global outreach? Now seventy-five years after the power and initiative of the original post-World War II Marshall Plan’s genius may be at risk.”)
The U.S. National Security Strategy identified “China as a strategic competitor and characterizes the BRI as a challenge to U.S. interests, particularly as it aims to give China a strategic foothold in Europe and Asia, by expanding its unfair trade practices and investing in key industrial, sensitive technologies and infrastructure,” claimed Stephanie Segal in her statement before the U.S. House Committee on Foreign Affairs Subcommittee on Europe, Eurasia, Energy and the Environment on May 9, 2019.
At this same time, the U.S. military is deeply concerned about much of BRI’s infrastructure projects to build both commercial and military applications. New roads enable troops to move freely; new water ports permit the movement of naval ships and troops, enabling the projects of increased military strength. The Pentagon views the BRI with “skepticism and a degree of apprehension.”
According to the Diplomatic Courier of October 17, 2019, “It’s becoming extremely hard for the United States to make its partners align with its stance over BRI and China’s effort to increase its global presence…The United States must draw attention to BRI’s actual negative effects to have its partners align with its stance on BRI and China’s global ambitions…..If the West still cares about individual human rights as well as Taiwan it has to come together to mitigate BRI’s negative implications.”
While Washington presents the BRI as an inherently economic and technical project, it has important geopolitical implications that contribute to balancing the U.S. presence in the region. BRI is inextricably linked to the country’s long-term vision of its role in world politics in the middle of the 21st century.
Although Europe has moved closer to U.S. views on some of China’s efforts related to the BRI, it appears more willing to establish a working relationship with China at a time when Washington has been conducting a more strident trade war with Beijing and has issued warnings about China’s strategic challenges to the West.
Through all of this, China faces its own growing problems. By mid-July, 2021, Beijing reported that its economy grew 7.9 percent, markedly slower than the 18.3 percent leap the economy made in the first three months of the year. Theoretically, should its economy slow more, it might pull down the rest of the global economy, a worrisome thought for most nations. And cases of Covid-19 and the Delta virus are spreading, adding worries ahead
On Monday, July 12th, EU foreign minister and China signed a proposal that gives the European Commission nine months to identify infrastructure projects “with great impact” along an imaginary trade route through Eastern Europe and on to Central Asia. The EU strategy is called “A Globally Connected Europe.” This is their first and major response to China’s infrastructure investment BRI. This concept, if approved, would be an ambitious global to further integrate Europe to the world. “We see China using economic and financial means to increase its political influence everywhere in the world. It’s useless moaning about this, we must offer alternatives,” said Heiko Maas, Germany’s Foreign Minister, “It is important that the European Union…..coordinates them very closely with the United States,” he urged.
It will be a hard sale as there is no unanimity on this issues with some EU governments. Angela Merkel and Emmanuel Macron want to revive the stalled investment deal with China and argue that Beijing’s assistance is crucial for global efforts to reverse climate change and overcome the pandemic. Luxembourg’s Foreign Minister Jean Asselborn cautioned against making China an adversary. Attempts to balance out the ensuring conflict with the EU and China will be formidable and many leaders argue that this strategy is unsustainable in the long run.
Testifying before the Senate in October 2017, now former Defense Secretary James Mattis harbored serious concerns about BRI, “In a globalized world, there are many belts and many roads and no one nation should put itself into a position of dictating ‘one belt, one road.’” And, again in June 2018, Mattis warned that China was “harboring long-term designs to rewrite the existing global order…. From the Chinese perspective, the United States will never voluntarily cede significant international influence to China. America regards China as a revisionist power whose long-term aim is global supremacy.”
The American Enterprise Institute noted that since the BRI announcement in 2013, China has “signed $460 billion in construction contracts across more than 140 countries. The initiative now reaches into Africa, Latin America, cyberspace and even outer space.” Long-term the BRI is the single largest project to build infrastructure worldwide since the Marshall Plan to rebuild Europe after the second World War. The cost cost is estimated to run around US$1 trillion.
China’s quest to modernize dilapidated infrastructures in Central Europe has quickly been transformed into a geopolitical contest. Initiated by Poland and Croatia (2015), twelve countries recently united (2016) under the “Three Seas Initiative (3SI).” The name connects the nations located between the Adriatic, the Baltic and the Black Seas, covering one third of the EU area (28%) and about 100 million people (22 %) of its 446 million. President Trump promised $1 billion assistance in just two weeks (gaining House support on November 18th) before the U.S. Presidential election. A major goal is to prevent China from penetrating further into Europe.
China has provided $200 billion in loans, with a total investment of up to $1.3 trillion (dwarfing the original U.S. Marshall Plan) by 2027, designed to “reflect Chinese interests,” assuredly to replace the U.S. at the center of the global community. Loans and expertise are provided to build miles of new highways, along with donated security equipment to military and police forces. With the Covid-19 and Delta Pandemics, China has also dispatched large shipments of test kits, masks and ventilators to assist inviting governments, thereby strengthening their relationship worldwide in what has been referred to as “mask diplomacy.” The Pentagon also worries about strategic benefits of Chinese investments “in foreign infrastructure, such as port facilities, which are part of the BRI.”
The Financial Times said “Like the Marshall Plan, the new Silk Road initiative is designed to use economic threats as a way to address other vulnerabilities.” McKinsey’s Kevin Sneader wrote “Some people have talked about the BRI being the second Marshall Plan (the Marshall Plan was merely one-twelfth the size of BRI.)” And Bloomberg was quick to label BRI as “China’s Marshall Plan.”
There are five core similarities between the 1948 U.S. Marshall Plan and BRI according to Simon Shen and Wilson Chen. They are boosting exports, exporting currency, countering a rival, fostering strategic divisions, and siphoning away diplomatic support.
In 2013, China began to replace American dominance as it positioned itself against a vulnerable and slipping decline of her global interests, thus a burst of compounding threats. U.S. Senator Chuck Schumer said in May 2019, “We have to have tough, strong policies against China or they’ll continue to steal millions of American jobs and trillions of American dollars.”
Initially, China’s introduction into Europe with BRI was with the Visegard four countries from Central Europe, the former Soviet satellite nations, now part of the European Union. The EU had already launched a project to create a transport corridor linking Europe with China.
In total, globally 125 nations and 29 international organizations have signed up as partners in BRI, with more to come.
Italy, became a partner with BRI in 2019. Italy’s own development needs and national interest had prompted it to edge closer to China, despite U.S. opposition. The government is intent on improving the infrastructure at their ports along the Mediterranean with interconnectivity between land and sea. In doing so, Rome subverted the wishes of the other (EU) member states to conduct talks about participating in the BRI only as a European group. Trieste and Genoa successfully negotiated to be China’s next acquisition. Arguably, Italy may also be drifting away from its historic alliance across the Atlantic. On June 27th, Italian Foreign Minister Luigi Di Maio, in a meeting with Secretary of State Blinken said that Rome’s relations with the United States are much more important than its ties to China. He said Sino-Italian commercial ties are absolutely incomparable to Italy’s alliance with the U.S., as well as partnerships with NATO and the EU. This impressive call followed U.S. concern over Italy’s links to China, particularly after a previous government signed up to BRI in 2019. Di Maio told Blinken that “We are a strong trade partner with China, we have a historic relationship, but it is absolutely not comparable, and it does not interfere with, the alliance of values we have with the United States.”
“Let me be very clear,” Di Maio declared, Italy’s alliances with the U.S., NATO and the EU “are not just strategic alliances, but alliances of values which allow our democracy to confront issues such as violations of human rights.” Encouraging to the Secretary of State, but not adequate. Earlier, Rome joined as a participant in the U.S. initiative 3BW, which the White House calls “a constructive initiative to meet the enormous infrastructure needs of low- and middle-income countries,” providing them with a “positive alternative.”
According to the Center of a New American Security (CNAS), “After China invested in Greece’s Piraeus Port, Greece blocked an EU statement in the UN’s Human Rights Council that criticized China’s human rights record. China could use its significant economic influence with other NATO members such as Montenegro and Italy, to coerce those allied governments away from joining consensus at NATO.”
Chinese state companies had acquired a number of European seaports and container terminals, including Zeebrugge and Antwerp in Belgium, Valencia and Bilbao in Spain, and six other ports in France, The Netherlands and Croatia.
The deal between China and the EU, sealed in the final weeks of 2020, would if approved by the European Parliament damage relations with President Biden, opening questions and criticism that perhaps it was a diplomatic and political error. It would ultimately be a slap in the face for Trans-Atlantic ties.
Robert Gates, former Secretary of Defense believes that the Biden administration needs to update our foreign policy, “While the United States cannot compete directly with China’s Belt and Road projects and development assistance, we should look for ways to leverage the power of our private sector.”
Jake Sullivan, President Biden’s National Security Advisor tweeted on December 21, 2020 that the new administration “would welcome early consultations with our European partners on our common concerns about China’s economic practices,” while a spokesman at the Ministry of Foreign Affairs, Wang Wenbin said that the agreement between China and Europe would “inject more stability into the world.”
A spokesman for the National Security Council John Ullyot, warned that any commitment from China “that is not accompanied by strong enforcement and verification mechanisms is merely a propaganda win” for the Chinese Communist Party.
Noah Barkin wrote, “European countries must prepare for a world in which they will be viewed by Washington through a China prism – much in the same way that Europe was seen through a Soviet lens during the Cold War.”
After losing the 2020 election to Joe Biden, President Trump signed an Executive Order banning Americans from investing in Chinese firms that the Administration claims were owned and controlled by the Chinese military. China continues to expand its footprint and influence with grants and loans.
Will the United States surrender its long-standing and earned reputation of global outreach? The race between the U.S. and China is now moving into high gear. On June 8, 2020, the U.S. Senate overwhelmingly passed legislation that would pour nearly a quarter-trillion dollars over the coming five years into scientific research and development to bolster competitiveness against China.
Today, with China on the advance, unsettling Washington, will the United States aware of the risk to both NATO and the EU cease to support its long-standing history of aiding its friends? Should Brussels, continuing to cope with Covid-19 and Delta pandemics, fail to rescue its member states with a proper recovery program, China may be on a new alert to press forward. As the EU and the UK, unable to come up with adequate funding for its 446 million people, the U.S. will tremble that their friends across the Atlantic will succumb to BRI, and that the U.S. will be the next target for China (although they already have a strong presence, with Cuba, only 100 miles offshore.) President Xi Jinping had found his weapon to spread Chinese economic projects across the world. He is nearing his dream to make China the number one nation, economically, politically, and militarily. Would he be stopped? Before it is too late, the western world must forcefully respond.
China and the EU are moving ahead with a huge investment deals. At year’s end 2020, they agreed to make it easier for firms to operate on each other’s territory, a significant geopolitical victory for China. The U.S. is concerned while approval by EU’s Parliament is required.
The EU and China are two of the biggest traders in the world. China is now the EU’s second-biggest trading partner behind the United States and the EU is China’s biggest trading partner. And, many leaders across Europe don’t want to rattle this relationship worrying that Biden’s B3W proposal will do just that.
Pepijn Bergsen, a fellow at Chatham House believes that the EU desires to pursue a balancing act between Washington and Beijing for economic reasons and wants to avoid being sucked into a geo-political battle.
The priorities for both the U.S. and Europe must be first the Covid-19 and Delta pandemics, and then the pressing question of how best to confront and deal with the threats from China as its spreads its wings further into the Western world.
The U.S. Senate overwhelmingly passed legislation on Tuesday, June 8 that would pour nearly a quarter-trillion dollars over the coming five years into scientific research and development to bolster competitiveness against China. The Innovation and Competition Act of 2021 aspires to compete with China to boosts the country’s ability to match and surpass Chinese technology. It invests more than $250 billion into American semi-conductor manufacturing, the National Science Foundation, thus creating regional technology labs and spurring 5G innovation. The legislation will create grants and foster agreements between private firms and research universities to encourage breakthroughs in new technology. President Biden declared “We are in a competition to win the 21st century, and the starting gun has gone off. As other countries continue to invest in their own research and development, we cannot risk falling behind.”
On June 11, 2021 at the G7 meeting in Cornwall, United Kingdom, President Biden set in motion his proposal for countering China’s BRI. He wants nations of Europe, and Japan to counter China’s influence by offering developing nations hundreds of billions in financing as an alternative to relying on Beijing for new roads, railways, ports and communication networks. It is too soon to know if the “wealthy democracies” will be successful in mustering Biden’s plan, “Build Back Better for the World,” (B3W) to obviously contrast with BRI, which expects to provide a transparent infrastructure partnership to help narrow the $40 trillion needed by developing nations.
Resistance is nearby. For example, Germany, for which China has become the Number One market for Volkswagens and BMW’s is protesting; Italy, the first G7 member to sign up as a partner of BRI in 2019 remains dependent on Chinese technology.
Reflecting the President’s tone as the G7 meeting ended, Secretary of State Blinken pushed back reports of tensions among G7 leaders over China. “What we have is largely agreement on the need to offer a much more attractive alternative to the model that China is proposing for the world.”
Furthermore, he argued “But here we have a commitment to work together on something called ‘Build Back Better’ for the world to work on pooling of investments, pooling funds, bringing the private sector into make investments in health and infrastructure, in technology for low- and middle-income countries in a way that will produce new markets for all products and also a much more attractive alternative to what China is trying to do in these countries.” Blinken would summarize America’s ideology and commitment, “The G7 leaders must be unified and ‘deal with China’ from a position of strength.”
During a session with President Emmanuel Macron of France, Secretary of State Blinken said that the U.S. and France were “on the same page” in their determination to resist the possibility of a Chinese-led world order. “Knowing that China understandably bristles at being urged to play the game by the ‘rules-based-system’,” he argued that “our purpose is not to contain China or try to hold China back.” But, he added that when it comes to defending a free and open international order, “we will stand up.” Blinken made clear that he thought the better option (to BRI) is for low and middle-income countries is Biden’s B3W plan.
Citing strong differences of opinions from within the ranks of the G7, Robin Niblett, the director of Chatham House, a think tank in London, “America is becoming more realistic on China from the hard line, while Europe is becoming more realistic from the soft line.”
According to The Economist magazine, Biden is “pitting America against China.” Based on a White House document, the 3BW plan aims to “collectively catalogue hundreds of billions of dollars in the coming year.” This project expects to mobilize private and governmental agencies, likely through programs of loan guarantees and other financing measures requiring far more in the way of transparency and risk mitigation than Beijing. The expected next move came from Xi Jinping.
China’s President, on its July 1st, 100 year centenary with a show of pageantry and power, would boldly and defiantly declare that China would not be lectured. “The Chinese people will never allow foreign forces to bully, oppress or enslave us; whoever nurses delusions of doing that will crack their heads and spill blood on the Great Wall of steel built from the flesh and blood of 1.4 billion Chinese people. China will not be oppressed.”
These carefully chosen words are to all sides both challenging and frightening; the outcome may determine China’s, U.S.’ and Europe’s future.
Special thanks to the NATO Parliamentary Assembly for the frequent quoting of sections of their “China’s Belt and Road Initiative: A Strategic and Economic Assessment” (October 15, 2020) written by a team headed by their General Rapporteur Christian Tybring-Gjedde of Norway.
Jerry M. Rosenberg, is Emeritus Professor of International Business at Rutgers University; author of thirty books (many translated into Japanese, Russian, Czech/Slovak, Chinese and Spanish); awarded a Marshall Foundation Fellowship and three time Fulbright Award recipient. He received his B.S. degree from The City College of New York, an M.A. from Ohio State University, Certificate from the Conservatoire Nationale des Arts et Metiers in Paris, and Ph.D. from New York University.