The Belt and Road is driven by a capitalist logic recognizable to any large economy

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[dropcap]I[/dropcap]n November last year researchers from the Transnational Institute (TNI) wrote a framing paper on the Belt and Road Initiative (BRI) on behalf of the Asia Europe People’s Forum. The paper provided a quite different and refreshing perspective on the BRI, seeing it through the lens of political economy and, in particular, Marxist geographer David Harvey’s theory of the “spatial fix” for economies facing crises of overaccumulation. Steering clear of the noise of proponents’ and opponents’ political sloganeering around the Initiative, the researchers dug into the underlying economic drivers of the Belt and Road. Such an approach is potentially enabling for advocacy groups in that it helps to identify different actors and their motivations within the Initiative and provides new discussion points and perspectives for researchers and anyone else interested in the Belt and Road.

PPDC: Looking at Belt and Road as a whole, many have seen the motivation for the initiative through the lens of geopolitics – China attempting to increase its influence around the world. In your briefing, however, you reject this view in favor of the macro-economic push factors, which you describe as a “capitalist crisis with Chinese characteristics”. Can you tell us more about this reading of the BRI?

TNI: Viewing the BRI through the lens of political economy, rather than geopolitics, a different picture emerges. Rather than a ‘grand strategy’, we see the BRI as a broad and loosely governed framework of activities seeking to address a crisis in Chinese capitalism. Under the capitalist mode of production, crises routinely emerge and – as argued by geographer David Harvey – an indicator of such crises is the “overaccumulation of capital”. This overaccumulation can be defined as: “some combination of surplus capital looking for productive investment, surplus commodities looking for buyers, and surplus labor power looking for productive employment”. This then requires some sort of fix. As Harvey argues, such fixes are discernible throughout the history of capitalist development. For example, Britain’s export of surplus capital and labor in the nineteenth century to the United States, Australia, Argentina and South Africa. Or more recently, the export of surplus capital from Japan in the 1960s, South Korea in the 1970s and Taiwan in the 1980s. Significant parts of the export from the latter three in fact went to China and helped build up productive capacity there. In the framing paper, we argue that the BRI needs to be seen in the context of such fixes that have also been taking place in China to solve moments of “overaccumulation”.

As we try to show, similar activities to those currently happening under the BRI, in fact began in the 1990s in a similar moment of overaccumulation, as Chinese companies began operating abroad, including state-owned enterprises (SOEs). Thus, in this view, the BRI, like ‘Going Out’ and ‘the Great Western Development Project’ before it, provides a broad framework to incorporate and encourage these activities that seek to provide a solution to overaccumulation.

Almost any activity, implemented by any actor in any place can be included under the BRI framework and branded as a ‘BRI project’. This campaign mobilisation approach to policy making is common in Chinese economic policy. It allows Chinese SOEs and provincial governments to promote their own projects in pursuit of profit and economic growth, while the central Chinese government maintains a semblance of leadership and control over the initiative. Where necessary, the central Chinese government plays a strong politically supportive role, through local embassies, or national ministries or agencies such as the National Energy Administration or the Ministry of Commerce. But at the same time, with such a broad framework, and a multitude of actors involved, the Chinese government has struggled to effectively govern BRI activities.

PPDC: In particular, you talk about BRI as a “spatial fix” to China’s economic woes. Can you explain more about this concept?

TNI: David Harvey explains that when capital, for different reasons, can no longer find profitable outlets, crises characterized by surpluses of money, commodities and industrial capacity emerge, leading to “mass unemployment of labor and an overaccumulation of capital”. Capital is understood here as a process rather than a thing, whereby money is invested into productive labor in order to earn more money. If this process stops, surpluses of capital sitting ‘idle’ – that is, not in process (including money, commodities and machines) – emerge side-by-side with surpluses of labor power (meaning workers, who are unemployed). Under capitalism, such barriers to the process of capital can lead to situations of social unrest. Under globalized capitalism, any and all governments must manage these crises, if they are to remain in power.

Such crises are often managed by what Harvey terms a ‘spatial fix’, that is, as Harvey writes in his book Seventeen Contradictions and the End of Capitalism, the “absorption of these surpluses through geographical expansion and spatial reorganisation”. The crux of spatial fixes is to provide new opportunities for productively combining capital and labour in pursuit of profit. Spatial fixes can take many forms, such as opening up new markets by breaking down trade and investment barriers or building large-scale infrastructure projects to absorb surpluses while facilitating expansion into new territories. While these spatial fixes have occurred throughout the history of capitalist development, they are necessarily unable to permanently resolve the crisis, they merely delay or relocate it. In the framing paper then, we try to conceptualise the BRI as encapsulating the latest in a series of spatial fixes happening since the 1990s.

PPDC: What do you see as the principal motivations for Chinese companies, in particular SOEs, to invest along the Belt and Road?

TNI: We see profit as the main motive for Chinese companies, including SOEs, to invest abroad. Since reforms to corporatize Chinese SOEs in the 1990s, they have been required to become self-funding and their success is evaluated by the State-owned Assets Supervision and Administration Commission (SASAC) primarily based on economic targets, including profit. Investments and projects abroad are one of the means through which these SOEs are pursuing profits. This pursuit can take many forms, e.g. from the construction of infrastructure, to hunting for cheaper manufacturing opportunities, to constantly reducing shipping costs in different ways.

We aren’t thinking in terms of ‘along the Belt and Road’, as this assumes one big physical project, but see these as a broad range of investments branded under the BRI framework. Investments have also been branded by their promoters as ‘BRI activities’ in countries that have not signed Memorandums of Understanding (MOUs) relating to the BRI.

Branding investments and projects under the BRI provides Chinese companies, especially SOEs, with financing opportunities, political support for projects both from the Chinese government and potentially from the government where the project is located, and the prestige of their project being part of a global initiative.

PPDC: Given that BRI is designed to release the pressure valve on China’s overcapacity industries, many of which are polluting heavy industries, to what extent do you think the Belt and Road can really be “greened”, an intention that was reiterated at last year’s Belt and Road Forum in April?

TNI: ‘Greening’ the BRI will be challenging given the scope of the BRI and its focus on mega infrastructure and mega production. As renewable energy capacity has increased in China, some Chinese companies have developed strong technology and experience in this field. However, the use of this capacity and technology has not necessarily been used in BRI-branded projects outside of China. Furthermore, activists and researchers are increasingly showing there is also a ‘dark side’ to renewables, for example Corporate Europe Observatory’s research on so-called ‘renewable gas’.

The type of energy projects implemented in participating countries also depends on what these governments want. Where there is a demand for coal power and large-scale hydropower, profit-seeking Chinese companies will be keen to fulfil these demands. At the same time, we have seen strong lobbying from Chinese energy companies to promote their projects. In Myanmar, for example, hydropower companies, with the support of the Chinese Embassy in Yangon and the National Energy Administration, have lobbied the national government for the expansion of large-scale hydropower in the country’s north.

We also need to think about what is meant by “green”. In China, large-scale hydropower is viewed as ‘green’ and has been key to the reduction of China’s energy emissions. Large-scale hydropower has, however, had devastating impacts on communities affected. It is important that ‘greening’ the BRI does not mean destroying the lives and livelihoods of those involved.

PPDC: In contrast to placing China’s domestic economic issues as the main drivers of the BRI, you describe the geopolitics of Belt and Road as “a consequence” of the Initiative. Can you tell us a bit more about this perspective?

TNI: We argue the primary drivers of BRI are political-economic. The types of profit and growth driven activities currently being branded under the BRI were implemented long before the BRI was announced. However, the BRI does encourage the building of political and public support for the initiative (BRI priority areas number one and five), and trade and investment on such a mammoth scale is apt to change the economies and relations of many places involved, at both the national and local level. The BRI has already impacted relations between China and participating countries, and between participating and non-participating countries. Japan and the United States, for example, have launched similar initiatives in response to the BRI, in an attempt to prevent their own influence from diminishing.

PPDC: If the geopolitical implications of BRI are a consequence rather than a motivating factor, why do you think the initiative has triggered so much scepticism from Western governments, in particular the US?

TNI: Regardless of the drivers of the BRI, many western governments are viewing the BRI through how it impacts their interests (including the interests of capital emanating from their respective countries). As the BRI is increasing competition and BRI-branded projects are changing the physical landscape and movement of goods, people, resources and energy, this is undoubtedly impacting those interests. However, just because the BRI is perceived to be driven by geopolitics, doesn’t mean that it is.

PPDC: You also explain that China and the BRI are, contrary to more commonly heard interpretations, not trying to overthrow the international order, but rather are proactively engaging with international organisations to create legitimacy for and smooth the path for the initiative. Can you tell us more about how China is doing this and the likely intentions and outcomes?

TNI: In recent years we have seen a significant increase in the Chinese government’s involvement in the UN and other international organisations, including funding, personnel and cooperation. At least 29 international organisations have signed MOUs relating to the BRI, and the Chinese government, for example, is promoting the BRI as a key means to achieving the UN Sustainable Development Goals. This builds legitimacy for the BRI and seeks to change the perception of the BRI from a threat, to the BRI as a global and cooperative initiative to promote development. The Chinese government, for example, has also been a key advocate for a UN Treaty on Transnational Corporations and Human Rights. Another key moment was President Xi’s 2016 speech to Davos, where he made it clear that the Chinese government was willing to be a champion of free trade, as President Trump espoused more protectionist trade policies. These commitments show that the Chinese government is seeking to play a key and increasingly prominent role in existing international organisations, rather than overthrow them.

A notable exception is the establishment of ‘BRI courts’ for commercial and investor-state dispute arbitration. Here, rather than work within the existing (and flawed) international arbitration system, the Chinese government is establishing their own courts under the People’s Supreme Court. This is likely to create a venue for arbitration that is more in favor of Chinese companies but follows the same model as similar venues in Singapore, Dubai and Hong Kong. The Chinese government is, therefore, not overthrowing the existing system, just tweaking it in favor of Chinese actors. We are, therefore, likely to see an international system that increasingly involves and favors Chinese actors, but not an overhaul of this system.

PPDC: Looking at BRI as a “spatial fix” underpinned by economic considerations, what are the most hopeful pathways for better environmental and social governance of the Initiative? 

TNI: Viewing the BRI as a broad and loosely governed framework of many activities, rather than a pre-planned grand strategy, is politically enabling for activists on the ground, in that individual BRI activities (though large) are thereby not so different from other projects that they may have successfully challenged. Rather than being reduced to mere pawns in a larger geopolitical powerplay between governments, people can be mobilized and organized to engage in and/or challenge these activities as they see fit. While still very difficult, it is easier to halt or alter individual activities than an entire grand strategy hence opening up pathways for better environmental and social governance of BRI-branded projects.

Some activists and NGOs have had success halting BRI projects taking a ‘follow the money’ approach. Financiers of BRI branded projects, in some cases, have been willing to review  their financing if the project is shown to be unprofitable or harmful. For example, in March 2019, the Bank of China agreed to review their financing of the Batang Toru hydropower dam in Indonesia following concerns raised by campaigners. The bank has not yet announced the results of their review and the financing for the project remains in doubt. However, activists opposing the dam continue to be threatened and in October 2019 activist Golfrid Siregar died in suspicious circumstances.

Another successful approach has been through litigation in national courts. For example, in Kenya, the deCOALonize campaign won a court case to stop the construction of a BRI-branded coal-fired power plant in Lamu. Their case was based on environmental grounds and the companies’ lack of consultation with affected communities.

Lastly, the Chinese government is sensitive to criticism and does not want to be perceived as an imperial actor. As discussed above, the self-branding nature of BRI activities means that the brand is difficult to control. This presents risks for the Chinese government, who cannot control, and may not even be aware of harmful BRI-branded projects abroad. This sensitivity can also provide an opening for activists and NGOs.

PPDC: Anything else you want to add?

TNI: Chinese investments are often racialized in a way that investments from other countries are not. That is, investments are referred to as ‘Chinese’ or by ‘China’, while investments from other countries are mostly viewed as from a specific company. For example, an international investment by Shell is rarely seen as ‘Dutch’ investment but investment by Shell the company. It is also often assumed that the activities of Chinese SOEs are under the tight control of the central Chinese government, when in reality these enterprises are loosely governed by central or provincial government agencies with limited capacity. As profit-seeking companies, they are, in fact, not innately different from other international companies. It is important that we refer to individual Chinese actors, such as companies and provincial governments, by their names so as not to racialize investments and contribute to anti-Chinese sentiment.