- Infrastructure, while at the heart of China’s expansive and ambitious Belt and Road Initiative (BRI), remains only a part of this evolving effort.
- The Digital Silk Road, launched in 2015, allows China to accelerate domestic digitalisation, avoid difficulties associated with hard infrastructure, and develop both soft and hard power through the control of Information and communications technology (ICT) infrastructure.
- In its drive for a “common destiny” China faces international pushback, leaving digital diplomacy and international relations outcomes undetermined, and likely to evolve based largely on near-term developments in US foreign policy.
Since the peak years of 2016 and 2017, both the funding and construction pace of China’s BRI projects have slid substantially; the global COVID-19 pandemic of 2019 and 2020 has accentuated this decline. Caixin Online recently published an index of activity, which, in April was half the level of a year earlier, while the American Enterprise Institute’s China Global Investment Tracker showed investment announcements dropping to about $23 billion in the first half of the year, a fifth of the level in 2019.
The pandemic’s ongoing economic consequences have sharpened both the pre-existing slowdown in lending by China’s policy banks on the supply side, and unsustainable debt burdens and debt servicing difficulties on the demand side. Logistics have also suffered as critical work streams, and flows of labour couldn’t be commenced or completed, the commercial and financial viability of much BRI lending now hangs in the balance. Indeed, Wang Xiaolong, director general of the Foreign Ministry’s international economic affairs department, said that about 40 percent of BRI projects were adversely affected, and a further 30 or 40 percent had been ‘somewhat affected’.
Does slackening activity, coupled with the pandemic, mean that Chinese President and Communist Party (CCP) General Secretary Xi Jinping’s signature foreign policy—one of the key tools with which China hopes to shape the world order in its own image—is faltering? The answer from Beijing’s perspective is an emphatic no, but as we show here, the pattern in which the BRI evolves is now equivocal compared with what was being said only a short time ago.
The economics and politics of the BRI are, inevitably, closely intertwined. Economically, the BRI is designed to export home-grown local government, bank, and state-owned enterprise infrastructure financing, and development models as a front end, onto which other important economic and strategic benefits are bolted. These long-term benefits include more secure supply routes, better connectivity for China’s western provinces, opportunities for Chinese manufacturing, increased prevalence of Chinese brands and standards, and growing markets for Chinese goods and heavy industries suffering from overcapacity at home. Moreover, with infrastructure financing and or construction agreed and secured, China can offer to supply a range of other projects and programmes, including free trade deals, currency swaps, urban development strategies, educational, media and cultural arrangements and exchanges, and science and research cooperation.
While infrastructure indeed lies at the BRI’s heart, it is only a part of an evolving and flexible concept. Its geography has already changed, with Latin America and a Polar Silk Road added in 2017 and 2018 respectively, to what was previously an Asian-, Middle Eastern-, and African-only programme.
The BRI’s content has evolved too. In 2015, Beijing launched a Digital Silk Road, to not only pitch Chinese products across the BRI but also determine the construction and governance of telecommunications, data, financial, and other networks, as well as how technical standards for these networks are set.
Two years later, in 2017, the Health Silk Road began to make waves, with its initial activities aimed at organising high-level regional forums, establishing BRI coordinated reactions to public health emergencies, and not least, pushing Traditional Chinese Medicine as a key part of health diplomacy globally (and even at the United Nations). The pandemic, though, brought these health efforts into the limelight, as Beijing sought to exploit its access to pandemic-related materials for geopolitical gain in what has become known as ‘mask diplomacy’. Meanwhile, track and trace, the widely recognised tool for pandemic mitigation and control, is the fusion of what China wants the Digital and Health Silk Roads to be able to do.
It is thus clear that the BRI goes beyond just pure economics. Its grander design is to, along with China’s expansion of bilateral relationships with nations, and of its institutional presence in both existing and new global institutions, change the world order for China’s benefit.
If this sounds rather ambitious, think only about the language used by the CCP when its leaders talk of a “Community with a Common Destiny for Mankind”—a theme central to “Xi Jinping Thought”, which has already been incorporated in the party’s and state’s constitutions.
While the words “common destiny” were subsequently changed to “shared future”, the original words are more expressive and meaningful because they convey the idea of a new world order structured according to, and underpinned by, Chinese standards and values. In this sense, China’s array of Silk Roads are all interlinked and designed to boost an alternative, China-shaped order of global connectivity and economic interdependence to which nations will sign up, for fear of incurring loss by not doing so. The BRI is, in effect, the sum of China’s soft power plays.
But is this political calculation correct? Can the BRI bring about a Sino-centric world?
China’s digital diplomacy
China’s reasons to accelerate its digital diplomacy vis-à-vis the BRI are threefold: to fill the developing world’s digital infrastructure gap, to avoid dealing with the BRI’s hard infrastructure quagmire, and pursue greater hard and soft power geopolitical ambitions.
First, then, it is more vital than ever for every nation’s economy to be digitally enabled, to build a productive, resilient workforce and engage in the global marketplace. China is well-placed to empower digital transformation across the developing world and is cognisant of the economic advantages tied to early adopters of 5G, in which Huawei is currently a world leader.
China’s push to increase ICT investment is unquestionably linked to its bid to support ongoing domestic economic development, especially in the wake of the trade war and the ongoing pandemic. Even while responding to the COVID crisis, Xi promised that his government would continue to pursue the construction of 5G infrastructure and data centres, thereby amplifying earlier statements by the CCP’s Politburo that 5G will be critical to COVID recovery.
It was thus no surprise that China’s retail sector saw a marked acceleration of digital consumption during the early stages of pandemic-caused lockdown, with e-commerce purchases seeing 20 percent growth thanks to new demographics purchasing food, health, and essential items online. This increase in the number of active Chinese netizens bodes well for the Chinese government’s outward drive for an ambitious digital economy, including its mission to see one million companies ‘Go Cloud’ by 2025.
While this has secured some economic activity from consumers amid overall decline in household spending, the current level of investment from China’s major telecom providers is unlikely to stimulate to its economy enough to be the primary impetus of China’s digital drive.
Second, given that the BRI’s hard infrastructure projects are mired in logistical and financial complications, doubling down on digital investment seems apt, particularly as developing and emerging economies struggle to compete in the tech-centric, post-pandemic world. Moreover, ICT infrastructure projects require less capital outlay than the huge transport and energy corridors that have been congenital to the BRI; the former, therefore, can act as a strategic Band-Aid in addressing the criticisms of “debt-trap diplomacy” while avoiding a decline in BRI projects overall. For the roughly one-third of developing economies who owe China more than ten percent of their national GDP, side-lining any hard infrastructure projects in favour of tech connectivity would seem to be an attractive proposition that could even help further several of the UN sustainable development goals, as the Secretary General António Guterres himself has proclaimed.
Third, China is focused on both the soft and hard power implications of building access to and controlling an increasing slew of the world’s data and critical infrastructure services, which depend on ICT networks. A scathing Democratic submission to the US Senate Committee on Foreign Relations deemed this final motivation “digital authoritarianism” in July. The assumption seems to be that China is building superior technological capabilities to accelerate a global Chinese-led common destiny “in an attempt to sway other nations to adopt this alternative, authoritarian model for the digital domain.”
A more benign view of this objective suggests that the BRI, at its core, aims to connect and enhance international cooperation through trade, infrastructure, financial and people-to-people links. By fostering digital connectivity, increasing access to information, and enabling data sharing, China will encourage innovation and greater economic participation by BRI members, ultimately resulting in China securing a return on its investments with a more active and competitive global economy.
In contrast, the malign position on this third driver suggests that China has aggressive ambitions to use its digital capabilities as leverage against other countries to advance its own global political ambitions by accessing classified data, tracking and controlling the Chinese diaspora, pursuing cyber warfare, and weaponizing artificial intelligence.
In contrast to these polarised positions, we argue that China’s digital diplomacy will feature elements from all of the aforementioned objectives. For President Xi, furthering a common destiny implies pursuing an economic, political, and digital landscape with Chinese characteristics. The potential success of these drivers will depend on whether other nations feel compelled to sign-up to the Digital Silk Road and thereby begin to propel weight behind China’s goal for a common destiny.
With the exception of India and several African nations that have resisted the call to join China’s BRI, most developing world countries are welcoming this opportunity and the injection of capital that comes with it. The West, however, is generally wary of the BRI, with likeminded nations banding together to thwart the impacts of what they see as the greatest threats– the Five Eyes intelligence alliance’s rejection of Huawei being the most notable example.’
Seen in a different light, some argue that the US is employing a policy of containment to deliberately stifle China’s technological progress. China is yet to be deterred; Beijing will continue to offer its own alternatives to current US-dominated technologies, including its BeiDou navigation satellite system as a competitor to the widely used, US-Government owned GPS satellite. Meanwhile, countries such as Thailand, Brunei, Pakistan and Laos have adopted the BeiDou system, thereby lending credence to the notion that China is less likely to experience resistance from developing countries looking to adopt new technologies.
Any potential rebound in global growth from our current recession—the deepest ever—is not yet secure. With considerable uncertainty about the pandemic’s course and legacy effects, difficult conditions are likely to persist. Still, it seems wise for China to pivot the BRI towards soft, digital infrastructure to capitalise on what many countries want and need. Yet, China in the digital sphere, as elsewhere, lacks the ability to make this strategy effective or persuasive in the face of ongoing suspicions, particularly in the developed world, about both the BRI’s true motivations and potential pressure to adopt the CCP’s standards and systems.
To make China’s common destiny achievable, Xi must work harder to build trust and cooperation among BRI participants. While many countries seem willing to support and adopt China’s digital diplomacy, there is also rising pushback—for example in India, as well as parts of Africa and Latin America—against China’s efforts in this regard. A potential new US administration that adopts a more inclusive commercial and economic approach towards Asia and Africa might yet play an important role in determining the future of digital diplomacy, as well as other geopolitical outcomes.
This article gives the views of the authors, and not the position of the China Foresight Forum, LSE IDEAS, nor The London School of Economics and Political Science.
About the author
George Magnus is Research Associate at the China Centre, Oxford University, School of Oriental and African Studies, and a member of the China Foresight Forum. George was the Chief Economist, and then Senior Economic Adviser at UBS Investment Bank from 1995-2016. He had previously worked as the Chief Economist at SG Warburg (1987-1995), and before that at Laurie Milbank/Chase Securities, Bank of America and Lloyds Bank.
Hannah Bretherton is a member of the China Foresight Forum and a Member Engagement & Project Manager at the Australia-United Kingdom Chamber of Commerce. She is also a researcher in Chinese overseas investment, Chinese soft power, US-China relations and Australia-China relations. She began her career working as a policy researcher for former Australian Foreign Minister Bob Carr and has worked in government, universities and think tanks.
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