China Dream

How China's Belt And Road Became A Global Trail Of Trouble
By Wade Shepard

Sri Lanka's most corrupted President Mahinda Rajapaksa Mahinda Rajapaksa, the Chinese Ambassador to Sri Lanka Cheng Xueyuan and attendees look at a proposed construction model of Port City during an event to officially declare the 269 hectares of land reclaimed from the sea for the project as part of the capital Colombo on December 7, 2019.

China’s Belt and Road initiative (BRI), a network of enhanced overland and maritime trade routes better linking China with Asia, Europe and Africa began in 2013 with much fanfare and hope. Upwards of a trillion dollars were being put on the table to boost economic development in globalization’s final frontiers, Asia and Africa’s infrastructure gap was to be lessened, and the world’s second largest economy was taking more of an active role in international affairs with the prospect of creating a true multi-polar global power structure. 

With catchphrases like “a rising tide lifts all ships,” China stepped beyond its borders to an extent that hasn’t been seen for centuries—perhaps ever—and was welcomed by many emerging markets with open arms.
But today, nearly seven years since the Belt and Road began, the story is much different, as Chinese investment has become a euphemism for wasteful spending, environmental destruction and untenable debt. 

Many major projects are currently strewn around the world in half-finished disrepair and the opportunities that were sold to local populations rarely materialized. 

All up and down the Belt and Road, projects have been marred by delays, financial implosions and violent outpourings of negative public sentiment.
In the initial stages of the Belt and Road, it seemed as if China was trying to rewrite the book on international development. 

The projects were bigger, more costly, and riskier than what the world was used to seeing, which created a buzz and sense of excitement: could China step up onto the global stage and show us how it’s done? 

While the news tickers sparkled with headlines of multi-billion dollar deals, big moves, and action along the Belt and Road, a broader view would have shown that a large portion of these deals were being made with countries that had credit ratings classified as “junk.” 

Making big deals with countries like Pakistan, Sri Lanka and Malaysia showed the initial propensity of the Belt and Road to shoot for quantity over quality, expediency over transparency—and the reactions from this strategy was quickly felt across the entire network.
It was in Sri Lanka that the deficiencies of China’s international development activities were first revealed globally. 

China partnered with Sri Lanka’s most corrupted president, Mahinda Rajapaksa, who now faces allegations of financial irregularities, to build a series of infrastructure mega-projects in Hambantota, a vastly undeveloped region on the island nation’s southern coast. 

To start, the plan called for a new deep sea port, an airport, a stadium, a giant conference center and many miles of new roadways. 

These projects were mostly funded with loans from China, which a few years later Sri Lanka struggled to pay back, as the country sunk into a debt trap of its own making.
China eventually seized a 70% share of the deep sea port at Hambantota for 99 years for $1.12 billion. 

While this at first appeared to be a debt-for-equity swap, news later came out that Sri Lanka actually used the money to beef up its foreign reserves and make some other foreign debt repayments to save itself from economic collapse. 

However, the optics on the situation were entirely unhelpful, with headlines like “How China Got Sri Lanka to Cough Up a Port” echoed across media sources around the world as the “Chinese debt trap diplomacy” theory was born.
The Hambantota fiasco put a black mark on the Belt and Road’s financing strategies and served as a warning for emerging markets looking to make similar deals with China. 

Bangladesh, Malaysia, Myanmar, Pakistan and Sierra Leone have all subsequently decided to cancel or downsize some of their Belt and Road projects over concerns of ending up like Sri Lanka. 

China’s bags of money, which emerging markets were ogling over in the early days of the Belt and Road, seem to have lost a touch of their luster.

Chinese dictator Xi Jinping speaks with Sri Lanka's most corrupted President Mahinda Rajapaksa.

“As Chinese companies push deeper into emerging markets, inadequate enforcement and poor business practices are turning the BRI into a global trail of trouble,” wrote Jonathan Hillman of the Center for Strategic and International Studies. 

“A long list of Chinese companies have been debarred from the World Bank and other multilateral development banks for fraud and corruption, which covers everything from inflating costs to giving bribes.”
When the Belt and Road was first announced, Malaysian Prime Minister Najib Razak welcomed the initiative, and China quickly became the top source of FDI in Malaysia. 

According to the World Bank, between 2010 and 2016 nearly $36 billion was pumped into Malaysia by Chinese state-owned firms. 

Multiple big ticket infrastructure projects—including the East Coast Rail Link project and a massive port city called Melaka Gateway—were started, Chinese firms bought up multiple Malaysian ports, and bonafide mega-projects, such as the $100 billion, 250,000+ person Forest City, were being built with Chinese direction and financial backing.
Then came the problems. 

News of the 1MDB and other scandals connected with the prime minister came out, as it was discovered that over $7.5 billion of government money had disappeared. 

Via Belt and Road projects, China had a role in trying to help the embattled prime minister cover evidence of financial irregularities by artificially inflating the costs of infrastructure projects so the excess could be available for other uses. 

This favor came with a catch, however, as Malaysia was to give Chinese companies big stakes in national railway and pipeline projects and permission for the Chinese navy to use two Malaysian ports. 

This deal didn’t come to pass, but it yet again cast the Belt and Road in a dubious light.
There are many other examples of parties from China allegations of corruption up and down the Belt and Road. 

Bangladesh shut down a highway project that was supposed to have been built by the China Harbour Engineering Company due to the company reputedly offering a Bangladeshi official a bribe, Chinese development funds were reportedly allocated for Rajapaksa’s ill-fated reelection campaign, Chinese tech giants Huawei and ZTE have been probed for wrongdoing in numerous BRI countries, and the U.S. arrested the emissary of China’s CEFC Energy Company for illicit payments to officials in Chad and Uganda. 

A 2017 McKinsey survey found that between 60% to 80% of Chinese companies in Africa admitted to paying bribes and, almost needless to say, in the latest Transparency International Bribe Payers Index, Chinese firms scored second to last.At this point, it is clear that the BRI does not keep good company. 

In addition to most Belt and Road countries having poor debt ratings, they also tend not to fare so well in international corruption indexes. 

According to the TRACE Bribery Risk Matrix, 10 Belt and Road countries were deemed to be among the countries most at risk to bribery.
While the lack of transparency and oversight as to what China is doing abroad was a boon in the early days of the Belt and Road, the initiative has lost support amid the scandals, debt traps and failed projects that have emerged in recent years. 

Countries along the corridors are now operating with far more caution and scrutiny, pumping the breaks on many projects and potentially setting the BRI back for years to come.

Gen. Mattis says China's crackdown on Hong Kong protesters is a sign of China's dangerous ambitions

• Former Secretary of Defense Jim Mattis warned that China's treatment of pro-democracy protesters in Hong Kong shows what the totalitarian regime is capable of.
• "Watching what's going on in Hong Kong right now, their authoritarian mode against their own people... it would take a real stretch of imagination to say they would treat foreigners better than they treat their own people at home, if that's their world view," Mattis said, while also calling out China's actions in the Spratly Islands and Sri Lanka.

By Ellen Ioanes

Retired Gen. Jim Mattis, whose resignation sent shockwaves through the US military and its allies last year, opted to answer questions about political leaders like President Trump obliquely at a Tuesday think tank event. 

But he wasn't so tightlipped on another topic: China.
Mattis called out Beijing's treatment of Hong Kong pro-democracy protesters as a signal of what China is capable of.
"Watching what's going on in Hong Kong right now, their authoritarian mode against their own people...it would take a real stretch of imagination to say they would treat foreigners better than they treat their own people at home, if that's their world view," Mattis said at the Council on Foreign Relations in New York.
The Pentagon increasingly views China as the US's number one rival. 

Mattis recalled some of China's recent aggressions, namely its 2018 move to place weapons on the disputed Spratly Islands, despite Xi Jinping's promises to the contrary, and China's seizure of a Sri Lankan port the previous year to repay the loans China gave Sri Lanka to finance the port through its Belt and Road initiative.
"In the national defense strategy we'd call them a competitor," he said. 

"And what we're trying for is not great power deterrence, we're trying for great power peace."

"We can find a way to work with China, but we're going to have to confront China where they are interrupting the universal... the order of the world."
He saved his strongest criticism for China's actions in Hong Kong during the semi-autonomous territory's three-month-long pro-democracy protests.
"There are ways that China is working right now that we can no longer be deluded by our own desires, we are going to have to accept China as it is," Mattis said.
The Chinese People's Liberation Army has sent troops to Shenzhen, a city bordering Hong Kong, as a way to threaten the island with military intervention if protests continue, and recently drove military transport vehicles onto the island.
While the protests initially concerned a bill that proposed to send Hong Kongers charged with major crimes to the mainland for trial, they soon spiraled into broader demands for democratic reforms. 

As protests have continued, they have gotten increasingly violent, with Hong Kong police brandishing guns at protesters. 

China has also detained a Hong Kong resident on the mainland and waged a massive propaganda campaign against the protesters.
"So we're going to have to recognize it, cooperate where we can, collaborate where we can, and also confront where we must," Mattis concluded, without going into specifics about what that might look like militarily.
Mattis is the author of "Call Sign Chaos: Learning to Lead," a memoir of his four decades in the Marine Corps.
At the talk, Mattis' greatest concerns were about the state of America; he previously expressed dismay at the politically divided nature of the country. 

In concluding Tuesday's discussion, Mattis said, "I'm not convinced that we're turning [the US] over in as good a shape or better to the younger generation ... and that worries me."

China Falls Out Of Fashion For U.S. Brands

President Trump's Tariffs Push More US Manufacturers To Look Outside China
By SCOTT HORSLEY

Designer Isaac Mizrahi (left) embraces Robert D'Loren, CEO of Xcel Brands, which once manufactured 70% of its clothes in China. Today that's down to about 20%. The company now manufacturers in a variety of countries, including Indonesia, India and Sri Lanka.

A lot of American companies that make or buy products in China are starting to rethink that, as a new round of tariffs takes effect this weekend. 

But Robert D'Loren doesn't have to worry. 

As CEO of the Xcel Brands clothing company, he began moving production out of China some time ago.
"You never want to have all your eggs in one basket," D'Loren said. 

"China was easy. In retrospect, probably if you had 90% of your production in China, that wasn't good risk-management planning."
D'Loren, who sells clothing under the Isaac Mizrahi and Halston labels, among others, once manufactured 70% of his company's clothes in China. 

Today that's down to about 20% — a byproduct of D'Loren's effort to find faster, more flexible suppliers that can jump on fashion trends and turn out clothes in as little as six weeks.
"Sometimes there are things that by design and by luck ... you do that serve you well," D'Loren said.
Xcel now manufacturers in a variety of countries, including Indonesia, India and Sri Lanka, and it's exploring production in Central and South America. 

But building that flexible network wasn't easy. 

Clothes from the new factories didn't fit right at first, or the fabric wasn't what D'Loren expected.

"It took us five deliveries to get it right," he said. 

"Everything that could go wrong did go wrong."
Many companies are now going through a similar process of trial and error, as they look for ways to avoid the president's tariffs.
"The truth is that the trade war is a little bit of a wake-up call for many companies," said Gerry Mattios, a Singapore-based vice president with Bain & Company consultants.
He says rising labor costs in China were already causing some companies to look elsewhere for suppliers, and the Trump tariffs have accelerated that. 

But other countries will need a lot of investment to match the expert manufacturing base and robust shipping network that China has built over the past two decades.
A survey by the American Chamber of Commerce in China says most companies that do relocate look to Southeast Asia. 

Vietnam's exports to the U.S. jumped 33% in the first six months of this year, compared with the same period last year.
Mexico is another popular destination for companies shifting away from China. 

Roberto Durazo works for a company called Ivemsa that helps manufacturers set up shop in Mexico. 

He held three conference calls with potential clients in a single day this week. 

But for now, he says, most companies are keeping their options open.
"Not many of them are pulling the trigger," Durazo said. 

"My feeling is that many of them are gathering information and, if the trade war continues for a long time, just making the decision of coming into Mexico."
Mexico offers the advantage of much shorter delivery times to the United States. 

But it was only three months ago that President Trump was threatening tariffs on goods made there. Trump ultimately dropped that threat.
Trump has urged companies worried about tariffs to move production back to the United States. 

But only about 6% of the companies operating in China are considering that, according to the American Chamber survey.
Harry Moser, who runs the Reshoring Initiative, estimates that about 25% of those companies would find manufacturing in the U.S. competitive if they took tariffs, transportation and all other costs into account.
"Probably they made the right decision going to China when the wages [there] were so low," Moser said. 

"Probably they should have reevaluated it five years ago. But now that they feel they have to bring a lot of work out of China, now is the perfect time to reevaluate the U.S. as an alternative."
As the trade war drags on, more companies may rethink their presence in China. 

But for now, most are staying put. 

That includes Crown Crafts, a Louisiana-based company that makes baby blankets and other products in China. 

CEO Randall Chestnut told investors this summer that he looked into shifting production to a half-dozen different countries. 

But ultimately he decided it was cheaper to stay in China and simply pay Trump's tariffs.
"So we think that we're going to have to bite the bullet and, you know, pass it on," Chestnut said during a quarterly earnings call.
According to the American Chamber survey, 60% of the U.S. companies now operating in China have no plans to relocate.

China's Debt Traps

China's ambition dealt blow ahead of G20 as Tanzania and Kenya projects grind to halt

By Sophia Yan

The hopes of China’s dictator Xi Jinping to play a more assertive role on the world stage were under pressure on Thursday as he headed to the G20 summit amid a trade war with the US and blows to his flagship Belt and Road Initiative (BRI).
Eleven, who has reversed years of foreign policy caution, landed in Osaka amid reports that Tanzania had suspended a port project and Kenya halted construction on a coal power plant, dealing a major blow to Beijing’s ambitions in Africa.
The port in the Tanzanian town of Bagamoyo was worth $10bn and would have been the largest in east Africa.
But financing terms presented by the Chinese were “exploitative and awkward,” said John Magufuli, Tanzania’s president.
“They want us to give them a guarantee of 33 years and a lease of 99 years, and we should not question whoever comes to invest there once the port is operational,” said Mr Magufuli. 

“They want to take the land as their own but we have to compensate them for drilling construction of that port.” When Xi launched the BRI in 2013, developing nations enthusiastically signed on for loans to fund big projects that would set them on the path to prosperity. 

But six years on new governments are starting to cancel and renegotiate contracts given the weight of Chinese debt, casting doubt on the $1 trillion initiative set to inaugurate a new ‘Silk Road’.

Sri Lanka’s Hambantota port was a cautionary tale for many. 

After the country struggled to pay up on billions in debt, Beijing used hardball tactics to acquire a 99 year lease to the port in exchange for loan forgiveness.
The case was a stunning example of what critics had long feared – that the Belt and Road project amounted to a debt trap for weak countries around the world. 

It sparked worries China would again leverage similar defaults elsewhere to acquire key infrastructure assets; last year, the Zambian government even had to deny rumours it was planning to hand over control of major public assets.
On Wednesday a court in Kenya also halted plans for the construction of a $2 billion Chinese-backed coal power plant near the island town of Lamu, a UNESCO World Heritage site famed for its twisting alleyways and stunning coastline.
The plant, which activists say would have increased Kenya's greenhouse gas emissions by 700 percent, was cancelled after judges ruled the environmental assessment was inadequate.
Other African projects, including massive rail construction projects in Ethiopia and Kenya, have also come under scrutiny, leading China to write-off some loans.
Meanwhile Beijing is facing enormous protests in Hong Kong against a law that would extradite suspects to face trial in the mainland, where the Communist Party controls the courts. 

On Thursday hundreds of protesters in Hong Kong rallied outside the offices of the justice secretary, blocking roads as they called for the extradition bill to be dropped for good. 

Carrie Lam, the city’s chief executive, suspended it indefinitely after one million residents took to the streets decrying a power grab by Beijing.
The protesters have appealed for world powers to raise the plight of Hong Kong at the G20, although Chinese officials have already warned they will not discuss the matter.
Instead, Xi is slated to meet Donald Trump on Saturday as the US demands economic reform in return for the lifting of tariffs on roughly $200 billion of Chinese goods.
Mr Trump, officials said, was hopeful for some kind of accord as his 2020 re-election hopes hinge on a strong economy.
According to the Wall Street Journal, Xi will request that the US end its block on the sale of US technology to Huawei, and drop the demand for Beijing to buy even more American exports than it agreed to when the sides met in December.
Analysts doubted the G20 would see an end to the dispute. 

On Wednesday Mr Trump said he was happy with the status quo. 

“They want a deal more than I do,” he told Fox News.

China and the United States face off in Djibouti

By Arwa Damon and Brent Swails

Djibouti -- A dirt track at Djibouti's Doraleh Port leads to a series of unassuming single-story buildings that, earlier this year, hosted the world's two superpowers.
The Chinese contingent took their seats to the far right of the podium where US Rear Adm. Heidi Berg formally launched the US-led military exercise, Cutlass Express.
Cutlass, and the handful of other annual US-led drills held throughout the African continent, are a low-risk and relatively low-cost way for US Africa Command (AFRICOM) to gain and keep regional allies.
But in Djibouti -- a tiny nation of just 884,000 people that is a key Red Sea ally of the US -- and throughout Africa, there's new competition for local loyalties from China's military, which is increasingly asserting its influence on the continent.
In 2017, China's People Liberation Army (PLA) opened its first overseas base in Djibouti. 

The sprawling, gray concrete complex sits on a prime location next to one of Djibouti's main ports -- and is just a 15-minute drive from the US military's only permanent base on the continent, Camp Lemonnier.

The Chinese contingent takes their seats as US Rear Adm. Heidi Berg takes to the podium to formally launch the US-led military exercise, Cutlass Express.

Lemonnier is a strategic asset for US missions abroad, used as a staging area for America's intelligence and counterterrorism operations on the African continent and beyond. 

One AFRICOM official, who was authorized to speak on the condition of anonymity, says the physical PLA presence in Africa is becoming a long-term strategic concern for America.
"They (China) have upped their game, in plain language, and ultimately they are offering things that our partners want, that our partners need," said the AFRICOM official. 

"In places, we have concerns we are being out-competed."
On the ground, however, both sides are engaged in respectful diplomacy. 

The night before the Cutlass Express, Chinese military officials invited Adm. Berg and her contingent on board a Chinese destroyer docked at the nearby harbor. 

And, for the first time, Berg welcomed PLA commander Liang Yang to the exercise's opening ceremony.
When Berg was asked to comment on the "us or them" narrative, she was quick to refocus attention on what the US can do for its allies.
"I think we want to ensure that we don't frame it ... that Africa is a backdrop and an arena for us to score points off China," Berg said. 

"We are here and our investment and focus is on building our African partners."
The Chinese contingent at the Cutlass Express launch declined to comment to CNN, but Xi Jinping made it clear at a high-level summit in Beijing last September that he's pursuing a "comprehensive strategic and cooperative partnership" with Africa, which includes a $60 billion package of aid, investment and loans to Africa.
"We are about to set out on a new journey in history," he said.

Expanding in Africa
China has been expanding its military ties in Africa for years, through extended peacekeeping missions, military personnel training and the China-Africa Peace and Security Initiative forum.
The US, naturally, viewed the base with unease, given its proximity to Camp Lemonnier and Djibouti's main container port, which is the primary source of supplies to sustain a force of around 4,000 US personnel on the base.
"It's no secret that roughly 98% of the logistics support for Djibouti, as well as Somalia and East Africa, come through that port," AFRICOM's commanding Gen. Thomas Waldhauser told a recent Senate committee briefing. 

"That port is one of five entities in the overall Djiboutian port. And so, our access there is necessary and required."

The USS Chung-Hoon leaves Djibouti on its way back to its home port. The destroyer took part in this year's Cutlass Express exercise.

The loss of that access would be a devastating blow to American interests and operations. 

One way that could happen would be if China were to leverage its control over Djibouti's debt into control over Djibouti's ports. 

China holds around 80% of the country's debt.

Debt fears
In recent years, China has increased its decades-long military ties with African countries by expanding training programs and increasing weapon sales. 

It's now the number two arms supplier to sub-Saharan Africa after Russia and the number three supplier to North Africa, behind Russia and the US, according to research from the Stockholm International Peace Research Institute.
But at the heart of the US concern is China's lending practices on the continent. 

Since 2000, African countries have borrowed about $130 billion from China, according to a Johns Hopkins analysis. 

And the amount of loans has tripled since 2012, largely through its Belt and Road Initiative (BRI).

"This is a central preset to Chinese strategy. When you look through history you preemptively shape the environment, shape the potential battlefield, so that your adversaries decide to not even come out on to the field to begin with. There's real potential for the debt to do that," said Gabriel Collins, co-founder of research group, China SignPost.

Last year, US national security advisor John Bolton was blunt. 

During a Heritage Foundation speech that laid out the Trump administration's Africa policy, he claimed "China uses bribes, opaque agreements, and strategic use of debt to hold African states captive to Beijing's demands."
The US fears about losing access to the port could be rooted in history. 

In 2017, Sri Lanka surrendered a major port to China after defaulting on the Chinese loan.
In that instance, the Sri Lankan government, then led by Prime Minister Mahinda Rajapaksa, took on $1.5 billion of Chinese debt to develop the Hambantota Port, which ultimately failed. 

To ease its debt burden, Sri Lanka agreed to hand it over on a 99-year lease.

Djibouti's container port is key for US operations at Camp Lemonier. The base has no direct access to water.

Proponents of China's BRI point out that the scheme often funds much-needed projects that other investors would balk at supporting, and that its focus on infrastructure, with a target investment of $1 trillion in construction is having an immediate impact on the continent.
Djiboutian officials insist the country will maintain control over its ports and that, so far, the government has a solid track record of paying off its loans.

"The funding is coming from China mainly, but we own the investments, we own the assets. It's a port, it's a railway, it's a free zone, we own two thirds of our investments," said the chairman of the Djibouti Ports and Free Zones Authority, Aboubaker Omar Hadi.
But Hadi is also well aware of the risks of -- literally -- banking on China. 

He just returned from a trip to Asia and Europe to try to drum up investment. 

"We don't want to depend only on one side, one continent, one country," he said.
Hadi bristles at the notion that his country and others on the continent are caught in a superpower tug of war. 

"The world needs to understand whether it's east or west or north or south, that we are going to decide our destiny ... Everyone is welcome," he said.

The future
The official position of the Djibouti government may do little to reassure skeptics who believe China's investment program is a front for a more sinister motive of establishing a military footprint worldwide.
"The theory is that if China continues unmitigated expansion, both militarily and economically, and we don't compete to protect our influence, the consequence could be that we are edged out of those areas and we lose the ability to address what we perceive as counterterrorism national interests in Africa," the AFRICOM official said.
Countering China's economic might is hardly something that should fall on AFRICOM, said Wake Forest professor Benabdallah.
"China has been operating (in Africa) for the better part of two decades now and has been doing so in a very smart way, with really close networks and connections that have been in the work for several years," she said.

Camp Lemonier is home to around 4,000 US military personnel. The base is a strategic asset for US missions abroad, used as a staging area for America's intelligence and counter terrorism operations on the African continent and beyond.

Benabdallah added that much of China's expansion in Africa is the result of strategic dedication led by Xi. 

The Chinese dictator has made six trips to the continent, and since January 1990, the Chinese foreign minister's first trip every year has been to a country in Africa.
Collins, founder of China SignPost, said soft power has long been a distinguishing feature of US foreign policy, and the current administration would be best served by taking a multilateral approach to relations in Africa.
"For the price of a single drone or fighter jet you could establish multiple university branches, and you would still have the funds to support those over the long haul," he said.
"It's not an instant payoff for someone who has the impatience of some of our current administration, but if we took a root cause strategy, 10 years from now there would be enormous dividends from that."
But until the US can figure out an "all of government" approach, some believe that much of the responsibility continues to land on AFRICOM's shoulders.
"We have gone from a unipolar world to realizing at best it's bipolar, at worst it's multipolar," the AFRICOM official said. 

"I would have a stark perspective. I think we are losing -- in Africa we are losing."

Rogue Nation

Beware of China’s new colonialism
By Benedict Peters 

America is slowly awakening to the growing menace of China’s plans for economic supremacy.
In 2013 Chinese dictator Xi Jingping launched an international investment program that became known as the Belt and Road Initiative (BRI). 

Under a new mantra to connect the global economy, China began investing heavily in foreign infrastructure projects in over 60 countries that account for 60 percent of the world population and 30 percent of global gross domestic product.
From 2013 to 2018 China made an estimated nearly $614 billion worth of investments in countries participating in BRI. 

Morgan Stanley predicts China’s overall expense from BRI could reach $1.3 trillion over the next decade.
Xi considers BRI an opportunity to share China’s model for economic growth with the developing world. 

Geopolitical rivals are concerned BRI investment programs will deepen China’s political influence and military expansion.
Is BRI a lifeline for the developing world, or economic imperialism?
In Africa, it is clear that China’s campaign of foreign investment is a new form of colonialism. 

The continent, where I live and work, is ground zero.
When BRI launched in 2013, it prioritized regional development projects in Asia, the Middle East, Africa and Eastern Europe. 

Italy became the first major industrialized nation in the Group of Seven to join BRI, despite opposition from the U.S. and the European Union.
U.S. officials are right to be concerned about the expansion of an infrastructure network that leaves crippling debt, faulty construction and project mismanagement in its wake.
The Center for Global Development published a study of 23 countries participating in BRI and found 10 to 15 are in danger of debt distress. 

Other high-profile cases in Sri Lanka and Pakistan are examples where BRI projects left the local governments in severe debt and incentivized officials to appeal to China for debt forgiveness.
When countries fall deep enough into debt, China will offer to renegotiate the terms of the debt in exchange for strategic assets or preferential treatment.
Last November, Moody’s Investor Service warned that nations benefiting from BRI are at risk of losing control of strategically important infrastructure, natural resources and other important assets if they fail to pay back their Chinese creditors. 

This is a major concern in Africa, where Chinese financing paved the way for essential infrastructure projects.
When countries fall deep enough into debt, China will offer to renegotiate the terms of the debt in exchange for strategic assets or preferential treatment.
In 2015 China promised $60 billion in grants and commercial loans to finance economic development projects in Africa. 

African leaders were eager to accept the financial assistance and as a result, China holds 14 percent of sub-Saharan Africa’s total debt stock and is the largest owner of public debt in Africa.
Public financing programs can often be a useful tool for local governments to build projects that generate economic growth. 

But an over-reliance on Chinese financing is saddling Africa with greater debt, leaving the continent at a strategic disadvantage in the future.
Developing nations of the world are understandably attracted to China’s deep pockets and “no strings attached” political doctrine for infrastructure investment.
U.S. National Security Adviser John Bolton has called attention to China’s strategic push in Africa and around the globe, but the U.S. must do more to re-establish itself as an alternative to China.
More specifically, America must present developing nations with a viable alternative to BRI.
Congress bolstered the development finance capabilities of the U.S. through the BUILD Act, which authorized the creation of the U.S. International Development Finance Corporation (USDFC).
The USDFC will consolidate the existing U.S. development finance institutions and provide new investment capabilities and financial tools to promote U.S. investment in the developing world.
The timing of the BUILD Act could not be more appropriate. 

The financial downsides of BRI are coming to light, just as China’s expansion reached the United States’ doorstep with major investments in the Caribbean.
The USDFC will be operational in the coming months. 

The new agency has an opportunity to expand the footprint of U.S. investors by positioning America as a more attractive option for infrastructure investment support.
As a businessman working in all parts of Africa, I can assure you that business leaders in Africa are eager to partner with the U.S. to provide a better model for the developing world.
China is running a rampant campaign of new colonialism through the developing world. 

The U.S. must do something more to present a viable investment alternative for government leaders participating in BRI.
The American people and government policymakers are waking up to this growing problem. 

I just hope it is not too late.

Belt and Road forum: China's 'project of the century' hits tough times

Raft of countries including Turkey have refused to attend latest summit amid growing concern about debt trap diplomacy
By Lily Kuo in Beijing

Workers perfect a decoration in the shape of a train for the 2019 Belt and Road Forum in Beijing, China. 

As China fetes its Belt and Road initiative at a summit this week, Chinese officials will be working hard to defend the flagship project from growing international criticism.
The three-day forum starting on Thursday is meant to promote Chinese dictator Xi Jinping’s “project of the century”, a foreign policy initiative launched in 2013 to revive ancient trading routes between Asia and Europe, as well as build new links in the Middle East, Africa, and South America.
But in contrast to its first summit two years ago, the Belt and Road Initiative (BRI) takes place in a much less welcoming environment. 

Critics say the initiative is an effort to cement Chinese influence around the world by financially binding countries to Beijing by way of “debt trap diplomacy”.

This week’s event is especially important for Beijing, which uses the forum as a way to convince the international community, as well as its own citizens, of the success of the project.
Beijing is likely to laud the memoranda of understanding signed at the event, which will conclude with a joint communique.

The China-funded Lotus Tower in central Colombo. 

“The overall purpose of the Belt and Road initiative is to generate legitimacy for the Chinese leadership and the Chinese Communist Party more broadly,” said Thomas Eder, a research associate at the Mercator Institute for Chinese Studies.
“Such prestige is bolstered by every government signing a BRI memorandum of understanding and every head of government attending a grand BRI summit in Beijing. These countries allow Xi Jinping to then tell Chinese citizens that the entire world is endorsing his policies and that he is the one to have put China firmly back at the centre of the global stage,” Eder said.
The event is to be attended by 37 leaders, including Vladimir Putin, Italian prime minister Giuseppe Conte, UK chancellor Philip Hammond, Pakistan’s prime minister Imran Khan and the heads of state of the 10 Asean (Association of South-east Asian Nation) states. 

The US is sending low-level delegates, and India is not attending.
Countries that previously attended but have chosen not to come this year include Turkey, which has publicly criticised China over is treatment of the Uighurs, a Muslim minority, Poland, Spain, Fiji, Sri Lanka, and Argentina, according to the Eurasia Group, citing geopolitical issues as a possible reason.

Books on Chinese dictator Xi Jinping are seen displayed in the media centre for the second Belt and Road Forum.

Critics have also called for China to institutionalise the Belt and Road initiative, so that the project is not seen as entirely Chinese-led. 

Others have cited environmental concerns, as Chinese companies build coal power projects around the world. 

Coal projects accounted for as much as 42% of China’s overseas investment in 2018, according to the China Global Energy Finance database.
“For the sake of the planet, for people who could be breathing in pollutants from coal plants and for the long-term economic health of many developing countries, let’s hope BRI quits coal,” said Wawa Wang, senior adviser at VedvarendeEnergi in Denmark.

Ahead of the forum, China has scored some key wins for the project. 

Italy is now the first G7 country to endorse the initiative, after signing up for Belt and Road in March, despite criticism from the US. 

This month, Malaysia agreed to continue a $10.7bn rail project, previously cancelled.
So far, China has signed more than 170 agreements with 125 countries, according to Chinese state media. 

Between 2013 and 2018, these deals totalled more than $90bn in Chinese investment.
Beijing has also begun to take some steps to soothe concerns. 

Officials are reportedly drafting rules on which projects can be called “Belt and Road”, to prevent the initiative’s brand from being diluted by unsuccessful projects. 

Chinese ambassadors in Kenya and Mexico have published editorials in local media defending the initiative.
On Friday, Xi will give a keynote address, where he is likely to strike a similar tone. 

“The Belt and Road is an initiative for economic cooperation, instead of a geopolitical alliance or military league, and it is an open and inclusive process rather than an exclusive bloc or ‘China club’,” Xi said in remarks given at a symposium in August.

Chinese Trap

Countries should not be duped into borrowing from China

“We are being duped, and we have to negotiate better for our own interests,” said Karim Raslan, the founder of ASEAN-focused political risk consultancy firm KRA Group about China’s Belt and Road Initiative.
By Shirley Tay

Countries should not be “duped” into borrowing from China through the Belt and Road Initiative, and should be looking for opportunities in India instead, says one firm critic of Beijing’s flagship infrastructure project.
”The BRI is all about Chinese strategic objectives; it’s not about the host countries,” said Karim Raslan, founder of political risk consultancy, KRA Group.
“We are being duped, and we have to negotiate better for our own interests,” he told CNBC’s Nancy Hungerford at the Credit Suisse Asian Investment Conference in Hong Kong on Tuesday.
Sometimes referred to as “One Belt, One Road,” the mega-project is a Chinese investment scheme which aims to create a vast global infrastructure network connecting China to more than 60 countries across Asia, Europe and Africa.
Controversy surrounding the strategy was highlighted in 2017 when Sri Lanka handed over its Hambantota port to Beijing for 99 years after the South Asian nation failed to pay back the money it owed Chinese firms.
The BRI is a “debt trap,” said Raslan. 

China is “not investing — they’re lending us money, for projects which have very little economic value to the host countries,” he added.
Borrowing nations need to “look more to India,” Raslan said. 

“We have got to focus there.”
He explained that “India, at the end of the day, (has)1.3 billion people. It’s growing very fast — they will be sucking in imports.”
India’s economy is poised to grow at 7 percent in 2019, expanding more than China’s projected growth of 6 to 6.5 percent the same year.

China's Era of Debt-Trap Diplomacy May Pave the Way for Something Sinister

Beijing cannot bend history to its will, but it will try.

By Patrick Mendis and Joey Wang

The key enabler that has allowed Beijing to protect its sovereign claims and project its power has been China’s explosive economic growth. 

As it cools, however, major programs such as the BRI will be critical to any future projection of power. 

As envisioned, the purpose of BRI is to “promote regional economic cooperation, strengthen exchanges and mutual learning between different civilizations, and promote world peace and development.” 

Behind this heady mixture of material, economic, and cultural aspirations, however, there are other hidden motivations not likely to be mentioned in official Chinese literature.
First, China also wants to decrease the dependence on its domestic infrastructure investment and begin moving investments overseas to address the capacity overhang within China. 

It should not come as an astonishment that the key instrument of this investment transfer comes with the Chinese system of “state capitalism,” which has further been solidified by Xi Jinping. 

Among the BRI infrastructure development projects, Chinese companies accounted for 89 percent of the contractors, according to a five-year analysis of BRI projects by the Center for Strategic and International Studies in Washington.
BRI also parallels numerous regional economic and infrastructure development initiatives such as the Bay of Bengal Initiative for Multi-Sectoral Technical and Economic Cooperation (BIMSTEC), the Ayeyarwady-Chao Phraya-Mekong Economic Cooperation Strategy (ACMECS), and the Regional Comprehensive Economic Partnership (RCEP). 

As the country with the deepest pockets, a number of these member-countries have found Chinese capital too attractive to resist. 

Chairing the BIMSTEC this year, Sri Lanka, for example, now finds itself granting China a ninety-nine-year lease at the Hambantota Port as well as approximately fifteen thousand acres of land nearby for an industrial zone to help pay for part of the $1.1 billion it owes China. 

Laos and Cambodia—members of ACMECS—are so indebted to China that Australia’s former Foreign Minister Gareth Evans has purportedly opined that they have become “wholly owned subsidiaries of China.” 

Some countries have now learned from the Sri Lanka experience and have recognized that the costs far outweigh the benefits. 

Bangladesh, for instance, has declined Chinese funding for the much needed “the twenty kilometers-long rail and road bridges over Padma river” and has instead opted to “self-generated funds.” Thailand, under ACMECS, is also working to create a regional infrastructure fund to reduce reliance on China and avoid what has generally been called China’s “debt-trap diplomacy.”
Even outside the immediate domain of the BRI, China is using its wealth to isolate Taiwan diplomatically. 

In Latin America , China peeled away El Salvador in August after peeling away the Dominican Republic in May 2018. 

With growing Chinese influence in Africa, Swaziland—a tiny landlocked country— remains the only African country to recognize Taiwan after Burkina Faso established diplomatic relations with Beijing in May 2018.
China is also expanding its presence and engagement in the Caribbean with capital investments and infrastructure financing, which have played significantly to China’s advantage given the Caribbean’s proximity to the hurricane belt in America’s backyard. 

The Caribbean—so-called the “Third Border” of the United States—has been neglected even after Congress passed the U.S.-Caribbean Strategic Engagement Act of 2016. 

The Trump White House has shown little interest in engaging the Caribbean basin. 

Many observers think that the region is “too democratic and not poor enough” to get on the American foreign-policy agenda even though Washington has long noticed the Chinese “inroads” in America’s Third Border region.
Beijing has often hailed the Chinese investments as “win-win.” 

However, given that many of these countries both within and outside the BRI are now indebted to China, it is not clear whether the partnership is a win for both China and its counterpart—or China actually wins twice , since 

a) it is generally well understood that the switching of allegiance is more monetary than ideological, and 

b) the recipient often ends up indebted to China without the means to repay the debt.
Second, China wants to internationalize the use of its currency along BRI and with the new partners of Africa, Latin America, and the Caribbean basin. 

Making the renminbi (RMB) a global currency in 2015 had been one of the highest economic priorities of Beijing’s grand plan. 

China and some sixty-five BRI countries—which account collectively for over 30 percent of global GDP, 62 percent of the population, and 75 percent of known energy reserves—are increasingly using the RMB to facilitate trade and infrastructure projects. 

Pakistan, for one, has switched from the dollar to the RMB for bilateral trade with China after President Donald Trump publicly attacked Pakistan onTwitter for harboring terrorists. 

The China-Pakistan Economic Corridor (CPEC) to East Turkestan—as one of the massive projects under the BRI—can now depend upon a steady stream of Chinese capital. 

Pakistan can now also minimize the risk of Washington’s threats such as cutting off economic assistance and military support. 

Use of the RMB would also help authoritarian regimes like Iran, North Korea, and Sudan to undermine the American-imposed “financial sanctions” on the violations of such norms as human rights, child labor, and human trafficking. 

Furthermore, the success of BRI, if achieved, would establish Eurasia as the largest economic market in the world and the changing currency dynamics could initiate a shift in the world away from the dollar-based financial system.
Third, China seeks to secure its energy resources through new pipelines in Central Asia, Russia, and South and Southeast Asia’s deep-water ports. 

Beijing’s leadership for some years has been concerned about its “Malacca Dilemma” as Hu Jintao declared in 2003 that “certain major powers” may control the Strait of Malacca and China needed to adopt “new strategies to mitigate the perceived vulnerability.” 

The Strait of Malacca is not only the main conduit connecting the Indian Ocean and the Pacific Ocean to China via the South China Sea but also the shortest sea route between oil suppliers in the Persian Gulf and key markets in Asia. 

In 2016, sixteen million barrels of crude oil transited through the Malacca Strait each day, of which 6.3 million barrels were destined for China. 

In 2017, China surpassed the United States as the world’s largest crude oil importer. 

Therefore, the sustainability and security of energy supplies is a key input not only to China’s domestic stability and economic growth but also to its military operations and, concomitantly, the very legitimacy of the CPC. 

Initiatives under the BRI—such as the CPEC to East Turkestan colony, the Kyaukpyu pipeline in Myanmar that runs to Yunnan province, and the ongoing discussions for the proposed Kra Canal in Thailand —are of vital interest to China because they would provide alternative routes for energy resources from the Middle East directly to China that bypass the Malacca Strait. 

The BRI will also support the expansion of China’s military bases across the Bay of Bengal, Indian Ocean, and the Arabian Sea.

Global Response Led by Washington
As Beijing’s intentions become clear, the continuing tensions have now revived the Quadrilateral Security Dialogue with Australia, India, Japan, and the United States. 

Each of these Quad members has its own economic and geostrategic concerns over balancing China’s expanding power and influence with a host of counter-strategies. 

President Trump has, for example, signed into law the Asia Reassurance Initiative Act of 2018—a belated expression of America’s commitment to the security and stability of the Indo-Pacific region.
The U.S. Senate has also passed the Better Utilization of Investments Leading to Development (BUILD) Act of 2018 to reform and improve overseas private investment to help developing countries in ports and infrastructure. 

It is also aimed at countering China’s influence and assisting BRI countries with alternatives to China’s “debt-trap diplomacy.”
Viewed in the context of history, China’s rise has been nothing short of meteoric. 

In the sixty-plus years since U.S. Secretary of State John Foster Dulles declared the three principles—that 

1) the United States would not recognize the People’s Republic of China, 

2) would not admit it to the UN, and 

3) would not lift the trade embargo—

China has grown from a veritable economic backwater to one that is now projecting its economic and military power around the world. 

China now seeks to create a new set of global norms, while overturning the existing norms that Beijing claims it had no role in creating. 

That may be true, but China should remember that those existing international norms have also played a critical role in raising China to where it is today.

War Indications and Warnings
Successive American and Chinese leaders have come and gone. 

But China’s strategic objectives have remained much the same as they were in 1965 when the CIA concluded, inter alia , that the goal of CPC for the foreseeable future would be to “eject the West, especially the US, from Asia and to diminish US and Western influence throughout the world.” 

The CIA further reported that Beijing also aimed to “increase the influence of Communist China in Asia” as well as to “increase the influence of Communist China throughout the underdeveloped areas of the world.”
While tensions remain fraught between Washington and Beijing, the logic of China’s exercise of military power and its willingness to go to war, however, is more nuanced.

In any confrontation with the United States, Beijing’s strategy will include “creating sufficient doubt in the minds of American strategists” as to the likelihood of winning an armed conflict with China. 

In his book, On China, former Secretary of State Henry Kissinger concludes that rather than measuring success by the battles won, the Chinese are likely to measure success through “the means of building a dominant political and psychological position, such that the outcome of a conflict becomes a foregone conclusion.” 

By its own actions, the United States has helped China all along by sowing doubt among nations in the Indo-Pacific as to Washington’s own commitment to the security and stability of the region.
Security cooperation between the United States and its allies are not intended to “contain China.” Rather, they are aimed to maintain a balance of power in the region to ensure regional stability and no one power overwhelmingly dominates the others. 

Whatever claims China has made to a “Peaceful Rise,” it is clear that “peaceful” is ringing somewhat hollow. 

The United States should continue to engage allies and friends to maintain a consistent and persistent presence—irrespective of the administration in place—as an expression of its resolve, unity, and commitment to security, peace, and stability in the Indo-Pacific region. 

As China continues its military buildup and modernization, the challenge for American negotiators is that intentions may change, but not capabilities. 

The fact that the United Kingdom is now seeking to establish military bases in Asia and the Caribbean reflect continuing concerns not only for the United States and the countries of those regions, but also those on the European continent.
In addition, the United States and its allies should firmly apply a unified front in pressuring China and engaging Beijing to respect global norms in areas such as trade, technology transfer, and intellectual property theft. 

In this regard, it is quite clear that China’s behavior in pursuit of its Made in China 2025 goals is not only a concern for the United States but also for other advanced economies. 

In the broader scheme of things, China should measure its ideological priorities against its costs. 

If and when China and Taiwan unite, then it will be based upon mutual amity and the belief that it is in the interest of all Chinese people to do so—not through coercion and aggression. 

Beijing cannot bend history to its will.

Chinese Peril

Freeing China's South Asian string of 'little pearls'
By Michael Bender


The annual G20 Summit reminded us that disregarded countries also can be opportunities. 

As the escalating U.S. trade war with Communist China dominates attention, smaller countries that Americans don’t think much about are suddenly important pieces of the Chinese chessboard. 

They offer an important lesson in the perils of our dismissive strategic engagement, but also an opportunity to challenge China’s growing national security hegemony while not harming America’s consumers and economy.
China has what it calls a “String of Pearls” strategy to dominate small countries in Southeast and South Asia — a maritime Silk Road along the world’s most vital maritime route that the U.S. Navy and its allies will be hard-pressed to counter. 

Stretching from the South China Seas to the Horn of Africa, the route is linked with deep-water “commercial” ports and bases — the so-called pearls — and with them China will tighten its string of control in the Indian and Pacific oceans.
China’s island-building and outright appropriation of islands in the South China Sea — and America’s seemingly too-little, too-late opposition — is well-known. 

But it is the Maldives and Sri Lanka, the largely ignored but critically significant “Little Pearls” of South Asia, that still offer hope.
In recent years, China has pumped resources into the diminutive island nation of the Maldives. 

It established a Joint Ocean Observation Station on the Mukunudhoo atoll near a crucial shipping route close to India. 

This follows China’s previous acquisition of 17 other islands in the same area, raising concerns that the real and unstated purpose is for naval dominance. 

Last March, shortly after announcing the JOOS initiative, Beijing sent a combat naval force there to reassure the pro-China Maldivian president during a declared state-of-emergency.
Meanwhile, China’s huge infrastructure “investments” have driven Maldives into an unpayable debt equal to more than 25% of the archipelago’s GDP.
To the opposite side of India’s southern tip, Sri Lanka is becoming a more important “Little Pearl” on China’s string. 

The George W. Bush administration halted U.S. aid to Sri Lanka in 2007, leaving Communist China to jump in and fill the vacuum. 

Since then, the state-owned China Communication Construction Company (CCCC) funded a multibillion-dollar “Port City” project in the port city capital of Colombo, with over $13 billion expected to be invested in this project over the next 20 years. 

Beijing is poised to monopolize the financial and development market of the benign but geo-strategically important island nation.
Meanwhile, China is building a billion-dollar deep water complex called Hambantota Port on the south of Sri Lanka, about 10 nautical miles from the main shipping route between Asia and Europe. The port project gives the Chinese primary operational control of the port for the next 99 years. 

Smaller deals, such as the $50 million to be paid to a state-run Chinese company to augment the state-run Jaya Container Terminal, are also completed fairly regularly and continue to add to financial leverage that the Chinese are accumulating over Sri Lanka.
With Sri Lanka’s debt, much of it to China, continuing to balloon out of control, Beijing has seized on this as an opportunity to gain further control of Sri Lanka’s financial future through its manipulative loan collection practices and by controlling of some of the country’s most significant commercial facilities, and capturing Sri Lanka in an $8 billion debt-trap.
Making matters worse is Sri Lanka’s ongoing constitutional crisis that has paralyzed the country politically for several months — and promises to continue to do so for another year. 

The Chinese have taken advantage of the crisis, squeezing Sri Lank for more and more development deals.
Sri Lanka’s political leadership is paralyzed. 

In late October, President Maithripala Sirisena sacked his prime minister and appointed his arch-rival Mahinda Rajapaksa, the still-popular former president, in his place. 

This rare moment of realpolitik and unity in Sri Lanka was short-loved, however, because the incumbent prime minister refuses to step aside. 

Now the Supreme Court of the nation is seemingly overburdened with being the sole entity responsible for solving the constitutional stand-off and re-instating a functional government.
Without effective leadership, Sri Lanka will continue to drift into the hands of the Chinese — which the obdurate former prime minister seemingly welcomes. 

Only a snap election, such as a plebiscite, can break the stalemate and empower the Sri Lankan people to pick their own prime minister — and to break Chinese Communist economic, military, and political domination of their country.
The growth of China’s commercial investment and soft power in South Asia’s “Little Pearls” bring Beijing closer to achieving their global ambitions. 

They also erode democratic values and processes in nations like the Maldives and Sri Lanka, whose democracies have begun to crumble under the weight of burgeoning debt and influence from the power-driven, Communist hegemon.
The G20 summit is an opportunity to highlight these troubling facts. 

The Trump Administration must not only expose Beijing’s economically disastrous developmental schemes as the manipulative power grabs that they really are. 

It must also actively engage the vulnerable small nations targeted in China’s String of Pearls. 

In doing so, the United States can strike at China’s mercantile and military hegemony while gaining much-needed leverage over the Red Tiger’s other economic and fiscal bullying, and help to free vulnerable countries like Sri Lanka and the Maldives from indenture. 

It’s time to free China’s “Little Pearls.”

Trophy Infrastructure, Troublesome Debt: China Makes Inroads in Europe

Beijing is constructing parallel financial and commercial networks across Central and Eastern Europe to challenge the global order
By James T. Areddy

BELGRADE, Serbia—Europe is distracted by internal discord over immigration and its tense relationship with Russia and the U.S. 

Seeking to fill the void, China is taking advantage of a historic opportunity to wedge itself into the heart of the West.
Deal by deal, applying experience honed in Asia and Africa, China is constructing parallel financial and commercial networks in Central and Eastern Europe to challenge the global order. 

It has taken footholds in more than a dozen nations on the periphery of the European Union. 

Some, such as Hungary, are smaller, more marginalized members. 

Others, including Serbia, are on the runway for admission.
Chinese workers set a highway through Montenegro’s impassable mountains on pillars as tall as a 50-floor skyscraper—part of an emerging corridor of highways, ports and rail lines that outlines a new Chinese trade route between Greece’s Aegean coast and Latvia on the frigid Baltic.
Chinese technology governs a new international money-transfer system in Serbia. 

Chinese banks gobbled up a newfangled issue of yuan-denominated bonds from Hungary. 

Outposts like Košice, Slovakia, are now stops for freight trains from China.
Beijing’s offers of trophy infrastructure and financial lifelines to troubled economies give those countries proposals they aren’t hearing from Washington and Moscow, which both generally view the region through prisms of national security. 

Nor are they hearing such proposals from Brussels, preoccupied with fraying EU cohesion.

Serbia’s Aleksandar Vučić and Chinese Premier Li Keqiang at a 2014 ceremony to open the China-Serbia Friendship Bridge over the Danube in Belgrade. 

For European politicians, the Chinese alternative promises quick results and less fuss over contracts and transparency than typically found in the West. 

The catch is that China’s package deals are government orchestrated and require borrowing from its banks to pay its contractors. 

A few countries, including Montenegro, are taking on large amounts of debt in the process.
Most of the Chinese financial support in Europe is loan-based, helping turn nations into clients of Beijing’s banks. 

And with each achievement, the Chinese companies building infrastructure and selling software or services gain more credibility in the West. 

Stretching its engineering capacity and technological innovation westward helps China expand and modernize its economy, as well as bolster alliances.
Beijing cheered when Greece blocked an EU effort last year to condemn a Chinese crackdown on political activists. 

Politicians in Brussels suggested that Athens had grown too dependent on China because a Chinese government-run company runs Greece’s main port. 

Greece called the proposed measure “unconstructive and selective criticism.”
The push is part of China’s Belt and Road Initiative to develop trade, financial and communication networks around the world—a strategy that came out of the global financial collapse a decade ago, to lessen China’s dependence on a U.S.-led economic order it blamed for the crisis. 

Major infrastructure is the initiative’s calling card.

China Calling
Serbia has welcomed billions of dollars' worth of deals from Chinese companies.

The $255 million China-Serbia Friendship Bridge marked the beginning of major Chinese construction engineering commissions in Europe.

Serbia in 2018 chose Zijin Mining Group Ltd. to invest in its largest copper mining and smelting complex, RTB Bor, in a $1.26 billion deal.

Serbia credits China's Hesteel Group with saving 5,000 jobs with its 2016 takeover of a steelmaker in the city of Smederevo.

Chinese engineers are at work on Serbia's $350 million portion of the Belgrade-Budapest high-speed rail line.

Serbia is emerging as China’s closest partner in middle Europe. 

China designed and built Belgrade’s first new bridge over the Danube River in seven decades, and helped modernize electrical and phone systems in the country. 

Most recently, Serbia got a financial-payments network from government-owned China UnionPay. The platform is Beijing’s answer to Visa and Mastercard, giving Serbians a way to use local credit cards overseas. 

It also gives China’s yuan a route into Europe.
UnionPay says its payment system in Serbia includes chips and other technology standards designed to guarantee “unblocked” international money transfers. 

That, in effect, could weaken a frequent U.S. tool sometimes used against Chinese companies—economic sanctions—by creating a parallel money-transfer system outside U.S. reach.
“For Serbia, it’s important that such a large international player has chosen to cooperate with it,” said Jorgovanka Tabaković, a prominent national politician and governor of the National Bank of Serbia.
As for its influence in Central and Eastern Europe, China points to its investment in the region, noting that it is a fraction of its pan-Europe exposure. 

Beijing committed nearly $8.9 billion in government-backed project loans and other development assistance to all of Europe last year, up from about $4 billion in 2016, according to a Wall Street Journal tally of deals cited in a compendium published by the Export-Import Bank of the United States.
That two-year tally is only 7% of China’s global total of $185 billion in loans and assistance for the period.
U.S. officials have cautioned developing nations that China’s outreach has strings attached. 

In an October speech in Washington, Vice President Mike Pence said of China’s infrastructure loans, “the terms of those loans are opaque at best, and the benefits invariably flow overwhelmingly to Beijing.” 

Defense Secretary Jim Mattis recently raised similar concerns, saying that “massive debt is piled on countries that fiscal analysis would say they are going to have difficulty, at best, repaying in the smaller countries.”
Outside of Europe, China’s $62 billion infrastructure plan in Pakistan is a factor in the country’s debt funk, which helped cost the ruling party a recent election and nudged the country closer to an international bailout. 

In August, Malaysia’s newly elected prime minister, Mahathir Mohamad, ordered a freeze on $22 billion worth of Chinese railway and pipeline construction his predecessor had endorsed, citing inflated contract values and excessive borrowing.
Last year, Sri Lanka surrendered a port to Chinese control to defuse a debt bomb. 

Chinese public works and their big loans are grist for political activists in Angola, Zambia and Kenya.
In Europe, Montenegro faces financial challenges associated with a deal from Export-Import Bank of China and China Road and Bridge Corp. to build its first-ever highway. 

The government calls it the nation’s “greatest engineering construction challenge in its history,” due to the country’s mountainous terrain.
The highway promises to link Central Europe to a port on the Adriatic Sea facing Italy. 

Montenegro already owes around $1.1 billion for the current work, which covers a 25-mile midsection that is due to be completed before mid-2019. 

The cost exceeds the original plans by hundreds of millions of dollars due to unhedged currency swings.
Unless the nation, known for cheap beach holidays, can come up with another $1 billion for a next phase, the four-lane roadway will terminate in a valley of 100 farmers and a general store.

Greece’s Port of Piraeus, pictured on Sept. 15, is managed by Chinese shipping company China Ocean Shipping (Group) Co. 

No data capture the breadth of the economic integration across the region, including private flows from investors who scrambled in after Beijing’s official nod in favor of Europe. 

Some styled themselves as trade middlemen in the continent’s Chinatowns and others formed “friendship” associations to link with local business and academia.
Oil company CEFC China Energy Co. amassed a $1.7 billion empire of property, brewery, soccer, bank and hotel assets in the Czech Republic, but they fell into question earlier this year when the company’s chairman came under investigation by Chinese authorities.
A senior executive at CEFC in Prague said plans were “developing” for China International Trust and Investment Corp. to take over the group’s Europe operations, which would in effect replace a private business with the Chinese state’s oldest-line international investment vehicle.
Beijing has talked about its inroads as a restoration of ancient Silk Road trade routes, but German politician Sigmar Gabriel sees bigger ambitions. 

“It is not a sentimental nod to Marco Polo, but rather stands for an attempt to establish a comprehensive system to shape the world according to China’s interests,” he said when stepping down in February as foreign affairs minister.
Along Europe’s east-west divide, Serbs, Slovaks, Croats and Czechs remain haunted by the Cold War and Yugoslavia’s bloody 1990s breakup. 

Those experiences partly cloud their views of the U.S. and Russia. 

China carries no such historical baggage.
In a near Central European future, a container of Chinese-made mobile phones or automobiles unloading at China Ocean Shipping (Group) Co.’s port in Greece could travel north through Macedonia and Serbia on Chinese toll roads and bridges and slot onto the Chinese-engineered railway to Hungary. 

China-run warehouses have been proposed in Poland, Lithuania and Belarus. 

The item might be purchased on the website of e-commerce company Alibaba Group HoldingLtd., which is expanding its cloud data services in Europe, as the internet traffic moves via the switches installed by Huawei Technologies Co. that dominate the region.
The fast-expanding ties between China and Serbia run from visa-free travel between the two countries to mining, manufacturing and weapons research.

Aleksandar Vučić, then Serbia’s prime minister and now president, meeting Xi Jinping and his wife, Peng Liyuan, last year in Beijing. 

A nation of seven million people with an economy similar in size to Vermont’s, Serbia projects political neutrality. 

Officials have called Beijing a “fourth pillar” of its foreign policy, along with Brussels, Washington and Moscow.
“We do not believe that we should choose between East and West,” Serbian Finance Minister Siniša Mali said in written responses to questions.
Serbian President Aleksandar Vučić describes Xi as a personal friend and has met him five times in two years. 

Their wives discussed bilateral relations in Beijing on Oct 29.
A poll last year by think tank Belgrade Centre for Security Policy found that Serbians see the U.S. as stronger militarily and politically than China but not far ahead of it economically. 

In the poll, the U.S. trails China in technology and in trust as an investor.
The nearly mile-long China-Serbia Friendship Bridge, opened four years ago, was the first major piece of infrastructure constructed in Europe by a Chinese team. 

That led to commissions for its builder, China Road and Bridge, in Croatia and Montenegro.
Even before the bridge’s dedication, according to the term sheet reviewed by the Journal, the clock was ticking on a 18-year requirement for Serbia’s Finance Ministry to wire millions of dollars each January and July to a New York bank account of the Beijing-based project lender, Export-Import Bank of China, until $217.4 million plus fees are repaid. 

The contract also stipulated that “goods, technologies and services… be purchased from China preferentially,” and that any disputes be settled in China.
Work is now under way by China Railway Signal & Communication Co. in Belgrade for a $3 billion rail upgrade to Hungary. 

Construction has been delayed on the Hungarian side because the EU challenged a no-bid award to a Chinese contractor. 

Serbia, unburdened by such rules, fast-tracked approval to the same Chinese contractors for its $350 million portion.
Down the block from Bank of China Ltd.’s new Belgrade office, an 11-floor, $60 million Chinese cultural and corporate center for a government-owned construction business is rising on the former site of China’s embassy. 

The mission was destroyed in 1999 when American planes dropped five laser-guided bombs on it during the North Atlantic Treaty Organization’s campaign to stop the Balkan conflict.
After taking three bows at a plaque to embassy “martyrs,” Beijing tourist Yang Xiaoyu said he was just 2 years old when the bombs fell. 

“I feel like our country was quite weak then,” Yang said. 

“When we came here today and recalled what had happened then, we feel that our motherland is indeed getting stronger.”