Rome (AsiaNews) – Almost seven years after it was established, the China-Pakistan Economic Corridor (CPEC) has become a “road to nowhere”.
The planned US$ 62 billion initiative, part of Chinese President Xi Jinping’s Belt and Road Initiative (BRI) designed to increase China’s economic power, was expected to connect Xinjiang, in north-western China, to the Pakistani port of Gwadar, on the Arabian Sea.
It originally included a seaport, roads, railways, pipelines, fibre optics, factories and an airport, but less than one-third of the announced CPEC projects have been completed.
Bloomberg reports that Pakistanis are convinced that the Gwadar area will become the country's main economic hub by 2030, and its primary source of income. But so far, the traffic has been rather sparse.
The site of the new airport, which was supposed to have been completed with Chinese funding more than three years ago, is a fenced-off area of scrub and dun-coloured sand.
The failure is due in part to widespread corruption in Pakistan, and to the presence of Balochi rebels in the region. However, the main problem is elsewhere: the Chinese are having second thoughts.
China is in trouble. Its economy is likely to go into recession in the first quarter of 2020 due to the effects of the Wuhan coronavirus. The trade war with the US has hit hard. Last year, its GDP (6.1%) recorded its lowest growth in 30 years.
It is therefore not surprising that Chinese leaders have turned off the taps, curbing BRI investment.
Several projects have been cancelled or downsized in countries like Malaysia and Kenya; other partners want to reduce their level of indebtedness towards China. The United States has been warning about the "debt trap" making these nations vassals to Beijing.
China's financial commitment to BRI is close to US$ 1 trillion. According to the China Global Investment Tracker, Beijing has invested around US$ 730 billion in BRI since it was announced in 2013 (up to 2019).
In 2019, US$ 85 billion were invested, down from US$ 130 billion in 2018. China’s Ministry of Commerce released even lower figures for the same period (US$ 75 billion).
It is clear that China does not have enough capital to live up to its promises. It has failed to involve other investors (like the United States, Europe and Japan), who see Xi’s plan as way to enhance China’s geopolitical influence.
China’s financial institutions (like the China Exim Bank) tie loans in BRI projects to the participation of Chinese companies and require the use of a certain percentage of materials and components from China on any given project. This discriminates against non-Chinese companies.
BRI has also a transparency problem, especially with respect to its financial sustainability. This has put a brake on the participation of western, Japanese, South Korean companies, etc.
