The forgotten victims of China’s Belt and Road Initiative

By Aaron Halegua and Jerome A. Cohen

World leaders will soon gather in Beijing for the second forum on China’s Belt and Road Initiative — the $1 trillion plan involving China’s bilateral agreements with more than 100 countries to enhance “connectivity” by building infrastructure projects and deepening economic ties. 

In the run-up to the event, critics have highlighted the projects’ negative impacts on host countries, such as debt traps, land seizures, corruption and environmental degradation. 

Some have pointed out the difficulties of establishing fair methods for resolving the many disputes that are arising between China and its new partners. 

A few have criticized the failure of certain projects to create adequate jobs for locals.
But one group of victims is often overlooked: the Chinese workers dispatched overseas to build these projects. 

If discussed at all, these migrant workers are generally demonized as the infantry “invading” the host country and “stealing” local jobs. 

In reality, they are extremely vulnerable to exploitation by their employers, sometimes even more so than their local co-workers.
The International Labor Organization reports that there are 14.2 million people in forced-labor situations worldwide and that indebted migrant workers are particularly vulnerable. 

Overseas Chinese workers are no exception.
The recent federal criminal conviction of a Chinese construction firm executive for subjecting workers in New York to forced labor is a case in point. 

According to trial testimony, prior to leaving China, the workers signed contracts promising to not interact with locals, to not leave their residence without permission and to return to China after completing their multi-year assignment — at which point the bulk of their salary would be paid. 

Each worker was required to post a security deposit of more than $20,000 to guarantee his compliance. 

Once in New York, workers’ passports were seized and they were required to work long hours and live in unsafe conditions. 

Fear of losing their security deposit and not collecting their earned wages essentially handcuffed them from escaping this exploitation.
This case is not unique. 

Official statistics reported there were nearly 1 million overseas Chinese workers in 2018 (excluding the large number of undocumented Chinese migrants), and researchers studying Chinese projects in places such as Asia, Africa, the Middle East and the Pacific Islands have found abhorrent labor conditions for foreign workers.
Incurring significant debts to pay large recruitment fees based on inaccurate job information is quite common. 

Federal authorities found that each of 2,400 migrant workers hired by Chinese firms to build a casino in Saipan, part of the U.S. Commonwealth of the Northern Mariana Islands, paid recruiters, on average, $6,000 in fees, and that they were cheated out of millions of dollars in wages.
In Belarus, hundreds of Chinese workers were unpaid for three months after working “like slaves.” 

Chinese companies failed to pay proper wages, provide protective equipment and conduct safety training in the Bahamas, Ethiopia and Vietnam, respectively. 

A Chinese construction worker in Israel recently died on the job. 

And, for those employees working for smaller Chinese subcontractors, labor conditions can be even worse.
Deep in debt, without passports, and lacking access to transportation and independent advice, Chinese workers are often left to endure these conditions without recourse. 

Those lacking proper visas are subject to quick deportation and are thus even more vulnerable. Language barriers make effective complaining to the host government difficult, and the Chinese embassy or consulate may be hours away. 

Those workers who are courageous enough to protest their maltreatment have been beaten by their employers or arrested and deported by local authorities.
So why should China care? 

Aside from a duty to protect its citizens, these conditions frustrate China’s broader objectives for the Belt and Road Initiative, such as building “win-win” projects, “people-to-people” connections and soft power. 

If Chinese executives are eventually jailed and projects stalled, companies and lenders will lose money. 

Employing flocks of often illegal Chinese migrants housed in Chinese enclaves fuels resentment amongst locals, while subjecting its citizens to abusive and unsafe work conditions inevitably hurts China’s image. 

Rampant immigration and labor violations have already caused officials in some jurisdictions to question lax visa policies that previously welcomed Chinese.
To its credit, China has acknowledged these problems, issuing policies and regulations that prohibit the collection of recruitment fees or security deposits, ban the hiring of workers on tourist visas and instruct companies to safeguard labor rights. 

But policies and regulatory standards are usually vague and not legally binding, and the legal provisions in place are routinely violated.
China should announce plans to address this issue at this month’s forum. 

The policies governing overseas conduct by Chinese firms — particularly those regulating subcontracting — should be translated into detailed, binding domestic laws with real penalties that are rigorously enforced. 

China’s banks should require projects they fund to adhere to and report on fair labor standards and practices. 

Complaint mechanisms must be established, and workers taught how to access them. 

Chinese embassies and consulates should assist in monitoring labor conditions. 

And China should demonstrate its commitment to labor rights by finally ratifying the International Labor Organization’s conventions on forced labor.
If China hopes to persuade host countries that it respects the rights and interests of their citizens, the best place to start is by showing how seriously it takes the welfare of its own.

Taiwan’s Leader Heads to the South Pacific in a Bid to Fend Off China

By Chris Horton

President Tsai Ing-wen of Taiwan, center, during a visit to a Taiwanese military base in January. At the end of her trip to the South Pacific, Ms. Tsai will make a stop in Hawaii on her way back to Taiwan.

TAIPEI, Taiwan — Taiwan’s president, Tsai Ing-wen, will travel to the South Pacific on Thursday to shore up ties with three island nations that still recognize Taiwan as a country, in an effort to offset China’s expanding influence in the region.
Only 17 countries recognize Taiwan’s government, and among those, Ms. Tsai will be visiting Palau, Nauru and the Marshall Islands.
China has been pouring aid and investment into the Pacific islands, raising the question of whether Beijing could strip Taiwan of more of its few remaining diplomatic allies and shrink the self-ruled island’s international presence.
The Trump administration has sought to push back against China’s reach in the South Pacific and Latin America. 

Australia is also concerned, and last year set aside more money in its budget for Pacific aid.
For the small, developing countries that still recognize Taiwan, the primary reason to consider switching recognition to Beijing from Taipei is the aid and investment that China offers. 

But potential economic benefits may come at a cost, officials and analysts in Taiwan and the United States have warned.
“Growing Chinese economic influence over time may be translated into political and strategic influence,” said Bonnie Glaser, director of the China Power Project at the Center for Strategic and International Studies. 

Commercial investment in a port, for example, could lead to military access, she said. 

“This is especially of concern in Latin America, a region that the U.S. has long considered its backyard.”
United States diplomats have argued to Taiwan’s allies that relying too heavily on China is risky, Ms. Glaser said. 

They have provided data about debt traps China has created elsewhere, she added.
The spokesman for Taiwan’s presidential office, Chang Tun-han, would not confirm if aid or investment packages would be announced during Ms. Tsai’s eight-day trip. 

Ross Feingold, a political analyst in Taipei, Taiwan’s capital, said that with elections coming up in Nauru and the Marshall Islands this year, Ms. Tsai was very likely to pledge assistance of some kind.

Taiwan’s foreign minister, Joseph Wu, says China is using its state-owned construction and engineering companies to approach governments in Latin America about switching recognition to China from Taiwan.

Ms. Tsai will make a stop in Hawaii on her way back next Wednesday — a transit that could annoy Beijing. 

The United States shifted to recognizing China’s Communist government in 1979, but still maintains unofficial relations with Taipei.
China considers Taiwan to be part of its territory and has long sought to reduce the number of countries that recognize it. 

Since Ms. Tsai came to power in 2016, Beijing has poached five of Taiwan’s diplomatic allies. 

China has also stepped up pressure on the island democracy by increasing its military activities near Taiwanese waters and airspace.
For Taiwan’s government, the 17 countries that still officially recognize it are of symbolic importance because they support Taiwan’s claim to statehood. 

The most immediate questions hang over two Pacific island nations that Ms. Tsai will not be visiting — Kiribati and the Solomon Islands.
According to Taiwanese news reports, she had initially planned to visit Kiribati on this trip, but the stop was called off because of what officials said were scheduling conflicts. 

Last May, initial plans for a visit by Ms. Tsai to Burkina Faso were similarly shelved shortly before the country severed ties with Taipei.
Rick Hou, the prime minister of the Solomon Islands, has said he will review the relationship with Taiwan if he is re-elected this year. 

China has become a major export destination for the Solomon Islands in recent years, primarily driven by unsustainable logging of the country’s rain forests.
China is aggressively pumping money into the South Pacific via Xi Jinping’s Belt and Road Initiative, said Karl Eikenberry, director of the U.S.-Asia Security Initiative at the Shorenstein Asia-Pacific Research Center. 

The Chinese initiative is a sweeping plan for infrastructure investment to more closely link China with Asia, Africa and Europe.
“A lot of the money that they’re investing isn’t transparent,” Mr. Eikenberry said at a news conference at Taiwan’s Institute for National Defense and Security Research on Tuesday. 

“It’s corrupting political systems.”
“Do they see strategic utility in having a presence in those Pacific island nations?” he said. 

“The answer is yes.”
Late last month, Secretary of State Mike Pompeo spoke at a gathering of South Pacific nations, including the leaders of the Marshall Islands, Kiribati and Palau, praising the countries for their recognition of Taiwan.

Soldiers hoisting the national flag at Liberty Square in Taipei, Taiwan’s capital. China considers Taiwan to be part of its territory and has long sought to reduce the number of countries that recognize it.

“We respect and support the decision those of you have made to continue to support Taiwan,” Mr. Pompeo said.
Latin America is also a source of worry for Taiwan.
Taiwan’s foreign minister, Joseph Wu, told journalists last week that China is using its large state-owned construction and engineering companies to approach governments of Taipei’s diplomatic allies in Latin America about switching recognition to Beijing.
“All these countries that are not able to finance the projects themselves need to get loans from China — that’s debt-trap diplomacy,” Mr. Wu said.
Mr. Wu cited as examples Panama and El Salvador, which normalized relations with China in June 2017 and August of last year, respectively.
The Trump administration has stepped into the diplomatic tug-of-war. 

In September, the State Department recalled its top diplomats from the two countries, as well as the Dominican Republic, which dropped Taiwan for China last May.
El Salvador’s ties with China have become a question. 

Nayib Bukele, the new president-elect, said after a speech at the Heritage Foundation in Washington this month that he was reviewing his country’s relations with Beijing, suggesting that reverting to recognition of Taiwan was a possibility.
Before Mr. Bukele was elected last month, his predecessor, Salvador Sánchez Cerén, met with Xi Jinping and secured $150 million in aid from China for 13 projects, the details of which were not made public.
Mr. Bukele said Beijing was selling projects to countries that cannot repay the loans that come attached to them. 

“They go in, they do projects that are not feasible, then they leave the countries with huge loans they cannot repay and they use as a kind of leverage.”
John Bolton, President Trump’s national security adviser, met with Mr. Bukele during his visit and said the United States would work with Mr. Bekele to “counter Chinese predatory practices.”

China’s Digital Silk Road Is Looking More Like an Iron Curtain

The funding of tech projects in dozens of countries may well divide the world.
By Sheridan Prasso

Ads for China’s telecommunications and tech-infrastructure companies appear prominently in developing countries such as Zambia.

The first billboard that greets passengers arriving at the airport in Lusaka, before Pepsi’s “Welcome to Zambia,” is an advertisement for Bank of China. 

Nearby, a Chinese company is building a sleek terminal. 

On the road into the capital city, near the office of Chinese telecom company ZTE Corp., another billboard features surveillance cameras made by Hangzhou Hikvision Digital Technology Co. 

At the national data center built by Huawei Technologies Co., a Chinese man in a bright orange vest walks toward a building that houses government servers.
This southern African nation, a former British colony rich in copper and cobalt, is spending $1 billion on Chinese-made telecommunications, broadcasting, and surveillance technology. 

It’s all part of China’s “Digital Silk Road,” a subset of its “Belt and Road” initiative that contributes an estimated $79 billion in projects around the world, according to RWR Advisory Group, a Washington consulting firm that tracks Chinese investment. 

That funding has boosted development in Zambia and many other countries, but it comes at a price.
Most of the digital infrastructure projects in Zambia, like the more visible airport terminals and highways, are being built and financed by China, putting the country at what the International Monetary Fund calls a high risk of debt distress. 

It’s also given rise to fears that what has long been a thriving and stable multiparty democracy is veering toward a Chinese model of repression.
“We have sold ourselves to the Chinese,” says Gregory Chifire, the director of an anticorruption organization who fled the country after being sentenced in November to six years in prison on what Amnesty International calls trumped-up charges. 

“People’s freedom to express themselves—their freedom of thought, their freedom of speech—is shrinking by the day.”
Zambian government officials defend their reliance on Chinese technology and deny it’s being used for political purposes. 

“The government has the responsibility to invest in infrastructure,” says Dora Siliya, the information minister. 

“Zambia’s model for development is neither the West’s nor China’s but an attempt to take the best from both. We have a Zambia model.” 

The Chinese Embassy in Lusaka didn’t respond to requests for an interview.
What’s playing out in Zambia is part of a larger contest between the U.S. and China for dominance over the future of technology and global influence. 

Companies from both countries sell tech products around the world, but Chinese businesses are offering a wide range of gear and relatively cheap financing in countries from Zimbabwe to Vietnam. They have an advantage in developing nations such as Zambia, which are looking to modernize their technology infrastructure.
The rivalry risks dividing the world with a digital iron curtain. 

The potential for bifurcation is already noticeable, as U.S. allies including Australia and New Zealand have banned Huawei and ZTE from providing equipment for 5G wireless technology on national security grounds and Canada arrested Huawei Chief Financial Officer Meng Wanzhou in December on allegations she defrauded banks to violate Iranian sanctions.  

China is exporting to at least 18 countries sophisticated surveillance systems capable of identifying threats to public order and has made it easier to repress free speech in 36 others, according to an October report published by Washington watchdog Freedom House. 

“They are passing on their norms for how technology should govern society,” says Adrian Shahbaz, the author of the report, which found that Zambia had slipped in the group’s ranking of national internet and media freedoms for the past two years. 

Nadège Rolland, a senior fellow at the National Bureau of Asian Research, a Washington think tank, says, “There’s a 1984 component to it that’s kind of scary.”
Discussions with government officials in Lusaka often begin with a history lesson. 

First comes the what-did-the-West-ever-do-besides-exploit-us part, followed by a version of the China-has-always-been-our-friend speech. 

It’s a convenient way to defend the growing reliance on Chinese projects that’s raised Zambia’s debt to that country to $3.1 billion, about one-third of its total foreign debt, according to government estimates.
That’s the way it plays during a December interview with Brian Mushimba, Zambia’s minister in charge of transport and communications. 

He’s from Zambia’s Copperbelt, one of 16 children. 

He studied engineering at the University of Arizona, worked at Pratt & Whitney in Hartford, and has an American wife. 

But he’s a firm defender of China’s development agenda, saying it’s lifted millions of people out of poverty and offers the same to Zambia. 

“China has not only done this but is willing to share and give cheap financing for us to also do it,” he says, sitting in his office in a one-story colonial-era building with peeling pale-peach paint. 

“Their model is very interesting, very different from how the Western world interacted with Africa. China serves as a model worth replicating.”

A Bank of China billboard greets travelers at the airport in Lusaka.
The 44-year-old minister has invoked the “China way” of dealing with the internet when threatening to ban Google and Facebook, which has provided a platform for disinformation campaigns in Myanmar and other countries. 

He’s called “fake news” a threat to national security and urged self-censorship, saying the government has the ability to monitor all digital devices in the country. 

A draft cyberlaw scheduled for debate in the National Assembly this year would create an agency with the power to determine whether information published online threatens national security, punishable by jail time, something free-press advocates say could be applied to news organizations that expose corruption. 

Criticizing President Edgar Lungu in social media posts has already landed several people in prison on charges of defamation.
While Mushimba acknowledges that the idea of governance “with less dissenting views” is in conflict with Zambia’s democracy and free press, he denies the government is trying to stifle expression and says it’s just enforcing the law. 

“The internet is a powerful tool that can’t be left to run wild,” he says. 

“The government has good intentions—the good intention to keep peace, order, and security in the country.”
Talk of restrictions doesn’t sit well with Richard Mulonga, the 39-year-old founder of Bloggers of Zambia, a group that’s been urging the government to follow European standards of cyberlaw. Mulonga, a photojournalist fired from his job at a state-run newspaper after he posted pictures on his blog that the paper wouldn’t publish, says free-speech advocates are fearful. 

“Citizens have the right to hold power to account,” Mulonga says, sipping coffee in a Lusaka hotel lobby, a Facebook pen clipped to the collar of his black T-shirt. 

“Only through free expression can we participate in democracy.”
In 2013 and 2014 the government blocked at least four websites by using a technique typically associated with censorship in China, according to the Open Observatory of Network Interference, a global network that collects data on internet tampering. 

It couldn’t prove Chinese equipment was involved, but its report cited information that Zambia had installed internet monitoring and blocking equipment from ZTE and Huawei. 

State-run Zambia Telecommunications Co.and its regulator declined to answer questions. 

A Huawei spokesman in Lusaka says he’s unaware of the company’s technology being used for such purposes.
Zambian Watchdog, which focuses on corruption, was one of the websites blocked. 

Today, its posts are regularly called “fake news” by government officials. 

Representatives of the group didn’t respond to requests for comment. 

But editors of the Mast, a newspaper often critical of the government, were willing to talk about the climate of fear engendered by new technologies.
“Being a newspaper, if you’re going to call a source, it means they know who you’re calling,” says editor Larry Moonze, sitting at a conference table in one bedroom of the two-bedroom house where the newspaper is produced. 

“Media institutions are working under fear of the government, with the help of the Chinese,” adds Chief Executive Officer Likezo Kayongo, whose brother founded a predecessor publication that was raided and shut down in 2016.
ZTE is also installing cameras in public spaces in Lusaka as part of a $210 million “Safe City” project. 

The contract was canceled in 2013, over irregularities in how it was awarded, then reinstated in 2015, government officials confirm. 

The project is designed to increase policing power in a city that’s already one of the safest in southern Africa.

Outside Huawei’s office in Lusaka.

In China, authorities use surveillance systems with facial recognition software to compare citizens against government databases, allowing them to track those with dissenting views as well as criminals. 

In Zambia, “there will be no political uses,” says Chileshe Mulenga, permanent secretary at the Ministry of Home Affairs, which is in charge of the project. 

“We are not passive. We are defending our interests.”
Representatives of ZTE in Zambia and China declined to talk about the company’s projects. 

Huawei spokesman Hansen He was more talkative. 

He says his company’s “Smart Zambia” initiative, which includes plans to bring mobile and broadband connectivity to rural villages without coverage and to put government functions online, is supplying technology for what Zambia wants to do and the support to make sure it works. 

“We just provide the solutions,” he says. 

“They are the operators to run it.”
Huawei also built Zambia’s national data center, which handles all government data and storage. Zeko Mbumwae, the center’s general manager, says officials have no concerns that the gear could be used for Chinese intelligence or data-gathering purposes. 

“Once someone’s built you a home, you change the locks,” he says. 

“That’s what we did.”
Another Chinese-funded project is the migration from analog to digital TV, which is being handled by TopStar Communications Co., a 60-40 venture between Beijing-based StarTimes Group and Zambia’s state-owned broadcaster, ZNBC. 

Chifire, the anticorruption activist, has called it “one of the biggest financial scandals in modern-day Zambia.”
The country of about 17 million people is spending $282 million on the switch, or about $16.60 a person. That’s 46 percent more on a per-person basis than South Africa is spending. 

Zambia borrowed almost all of the funding from the Export-Import Bank of China. 

Independent stations complained that they were being turned into content providers for the government’s network and protested the $72,000 in monthly fees for TopStar to carry their channels. They said the fees would put them out of business, leaving only a Chinese company and its state-run partner as the nation’s primary TV outlet. 

“We’re not refusing to pay,” says Costa Mwansa, CEO of Diamond TV. 

“What we are refusing is figures that will kick us out of business.”
The government says Zambia’s digital migration is expensive because the project includes eight new studios, broadcasting vans, and trips to China to train hundreds of ZNBC journalists. 

Anyone who criticizes the cost is comparing apples to oranges, says Siliya, the information minister. 

“The corruption assumption being perpetuated is wrong.”
Similar debates are going on across Africa and other continents as Chinese digital infrastructure spreads its roots. 

In neighboring Zimbabwe, where Hikvision surveillance cameras are being installed in the capital, Guangzhou-based CloudWalk Technology Co. won a contract last year for Africa’s first artificial intelligence project. 

It stalled when the government asked for a discount after learning that facial data would be transmitted to China to help the company perfect its technology, says Shingi Magada, a China-based Zimbabwean consultant who helped broker the deal. 

“We were just giving away our data,” he says. 

Hikvision has come in with a competing offer, and the Zimbabwean government is keen to go ahead at the right price, he adds. 

Neither Hikvision nor CloudWalk responded to requests for comment.
In Mauritius, off Africa’s east coast, Huawei is installing 4,000 cameras. 

Opposition politicians fear an increase in monitoring and surveillance. 

“It’s really Big Brother,” says Xavier-Luc Duval, a former deputy prime minister who now leads the opposition at the National Assembly. 

“They’ll be able to spy on all political opponents and control all the political activity. The potential for misuse is enormous.”

An ad in Lusaka for China’s Hikvision, the world’s largest surveillance-camera company.
Concerns that Chinese technology could be used for spying flared last year when Le Monde reported that data had been transmitted from the African Union’s headquarters in Addis Ababa, Ethiopia, to China nightly for years. 

The $200 million building was built by a Chinese company with Chinese funding. 

The organization, after accusing China of spying, backtracked.
In Vietnam, hackers took over screens and audio communications in the country’s two major airports in 2016 to broadcast propaganda supporting China’s claims in the South China Sea. 

The incident caused an alarmed Vietnamese government to warn its agencies and companies to reduce their reliance on Chinese equipment, which was believed to have played a role.
Potential threats to national security like these have prompted the U.S., Australia, and Japan to take countermeasures against the spread of Chinese technology. 

The three have opposed plans by Huawei to lay submarine cable connecting Australia to Papua New Guinea and the Solomon Islands in the South Pacific. 

But a Huawei cable project within Papua New Guinea is going forward despite efforts by Western governments to supplant it.
The U.S. is having better success blocking the rollout of Huawei’s 5G telecommunications systems, with Australia, New Zealand, and Japan among countries going along with a ban. 

The U.S. recently moved to inject $60 billion into the Overseas Private Investment Corp. to increase funding for projects in the developing world to counter China’s spending. 

And on Dec. 13, U.S. national security adviser John Bolton announced a new strategy for Africa to fund infrastructure projects, saying that Chinese influence has put the continent at risk. 

The U.S. is the largest donor to Africa, but most of its money goes toward health, agriculture, and clean-water projects. 

Bolton said the U.S. will try to ramp up funding for other projects. 

He cited Zambia as being particularly at risk.
To activists like Chifire who have suffered or fled the country, the China model appears ascendant. “What is remaining about democracy in Zambia,” he says on a phone call from a location he wouldn’t disclose, “is the name.”

China Offered to Bail Out Troubled Malaysian Fund in Return for Deals

The secret discussions show how China uses its  financial clout to corrupt and bolster its position overseas
By Tom Wright and Bradley Hope

Former Malaysian Prime Minister Najib Razak, third from left, in 2017 reviewed a model of a railway China agreed to build. Current PM Mahathir Mohamad has suspended the $16 billion project. 

Senior Chinese leaders offered in 2016 to help bail out a Malaysian government fund at the center of a swelling, multibillion-dollar graft scandal, according to minutes from a series of previously undisclosed meetings reviewed by The Wall Street Journal.
Chinese officials told visiting Malaysians that China would use its influence to try to get the U.S. and other countries to drop their probes of allegations that allies of then-Prime Minister Najib Razak and others plundered the fund known as 1MDB, the minutes show.
The Chinese also offered to bug the homes and offices of Journal reporters in Hong Kong who were investigating the fund, to learn who was leaking information to them, according to the minutes.
In return, Malaysia offered lucrative stakes in railway and pipeline projects for China’s One Belt, One Road program of building infrastructure abroad. 

Within months, Najib signed $34 billion of rail, pipeline and other deals with Chinese state companies, to be funded by Chinese banks and built by Chinese workers.
Najib also embarked on secret talks with China’s leadership to let Chinese navy ships dock at two Malaysian ports, say two people familiar with the discussions. 

Such permission would have been a significant concession to Beijing, which seeks greater influence across contested waters of the South China Sea, but it didn’t come to pass.

A Journal examination of the China-Malaysia projects, based on documents and interviews with current and former Malaysian officials, offers one of the most detailed accounts to date of the political forces at work behind China’s Belt and Road program, a signature initiative of building ports, railways, roads and pipelines in some 70 countries to generate trade and business for Chinese companies.
China is using the program to increase its sway over developing nations and trap them in debt while advancing its military aims. 

Several countries, including Pakistan and the Maldives, have been reviewing One Belt, One Road projects amid allegations deals unfairly advanced Beijing’s interests.
American national-security officials regard the Chinese efforts in Malaysia as Beijing’s most ambitious attempt to leverage the program for geostrategic gain, said a person familiar with U.S. discussions.
Minutes of the Chinese-Malaysian meetings say that although the projects’ purposes were political in nature—to shore up Najib’s government, settle the 1MDB debts and deepen Chinese influence in Malaysia—it was imperative the public see them as market-driven.
The Chinese government information office didn’t respond to requests for comment.

China's Infrastructure Initiative
China is building and financing a global network of trade and energy links to fill gaps in existing infrastructure spanning Asia, Europe and Africa.

China has said its Belt and Road projects promote development that benefits all sides. 

Nations wouldn’t welcome the program as they have if it carried the financial and geopolitical risks asserted by critics, China’s Foreign Ministry has said. 

It has denied that money in the program was used to help bail out the troubled Malaysian fund.
Documents reviewed by the Journal show Malaysian officials suggested that the infrastructure projects be financed at above-market values, generating excess cash for other needs. 

Investigators from the current Malaysian government, which replaced Najib’s last year, believe some of the money helped Najib finance his political activities and cover maturing debts of 1MDB, a fund he set up in 2009 to finance local development.
Najib was aware of the 2016 Malaysian-Chinese meetings, according to people familiar with them. Asked about them, the former prime minister issued a statement saying the rail project would have brought tens of thousands of jobs to Malaysia and stating that under his leadership, the country experienced nine years of continuous economic growth.
Current Malaysian Prime Minister Mahathir Mohamad, who ousted Najib in an election last May, put the Chinese projects on hold. 

Malaysia has since charged Najib with crimes that include money laundering and breach of trust. 

He has denied them, is free on bail and faces trial this year.

A tunnel approach for a $16 billion rail link China agreed to build for Malaysia. The government that took over in Malaysia last year has suspended the project. 

Malaysia, rich in natural resources and on a sea lane, is a prized ally in the U.S.-China contest for influence in Asia. 

The U.S. once courted Najib as it sought alliances in the region.
In July 2015, the Journal reported that $681 million of funds originating with 1MDB, known formally as 1Malaysia Development Bhd., had flowed into Najib’s personal bank accounts. 

Najib’s office said the money was a gift from a Saudi Arabian it didn’t identify and said most of it was eventually returned.
The U.S. Justice Department began investigating. 

Its probe damaged Washington’s relationship with Najib, according to officials in both countries, helping drive Malaysia into Beijing’s arms.
By 2016, Najib was in a bind because the fund had borrowed $13 billion it couldn’t repay. 

He turned to Jho Low—a Malaysian financier the U.S. Justice Department has alleged was the mastermind of a multibillion-dollar theft of 1MDB funds—to negotiate with China to resolve the crisis, according to current and former Malaysian officials.

Jho Low, a central figure in a multibillion-dollar scandal at a Malaysian development fund. A now-suspended Chinese ‘Belt and Road’ project in Malaysia has partially bailed out the fund’s debts. 

Mr. Low faces criminal charges in both Malaysia and the U.S. related to the Malaysian fund. 

The U.S. has sought to seize hundreds of millions of dollars of his luxury assets acquired with the fund’s money. 

He is a fugitive, living in China under Beijing’s protection. 

Chinese officials have declined to comment on that.
Low drew up plans for Malaysian meetings with Chinese officials and attended some of them, according to current and former Malaysian officials.
Malaysia’s new government discovered the documents, including minutes from Chinese-Malaysian meetings over several months, after a sweep of Najib’s offices, according to members of the government. 

The Journal, besides reviewing the documents, interviewed people in position to know the events, among them a former official of Najib’s government.
The documents describe a plan proposed by Malaysian officials for Chinese state companies to build two large projects with funding from Chinese banks. 

One, the $16 billion East Coast Rail Link, would be a railway across Malaysia connecting two ports. 

The other, the $2.5 billion Trans Sabah Gas Pipeline, would be built partly on Malaysia’s portion of the island of Borneo.
Armed with a bottomless supply of cash, Jho Low staged the ultimate extravaganza. Leonardo DiCaprio, Pharrell Williams, Swizz Beatz, Jho Low, Paris Hilton, Kim Kardashian and Kanye West all attended the Vegas party.

The projects would provide “above market profitability” to the Chinese state companies, the documents say. 

The rail link should have cost only $7.25 billion to build, according to an earlier estimate by a Malaysian consultancy, said a Malaysian government official.
The public must believe “all initiatives are market driven for the mutual benefit of both countries,” Chinese official Xiao Yaqing said at a meeting on June 28, 2016, according to minutes of the meeting.
Xiao, chairman of China’s State-owned Assets Supervision and Administration Commission, said he had “cancelled all his key engagements in Beijing to attend” because the matter “has been approved by President Xi Jinping, Premier Li Keqiang” and another senior Chinese official, according to the minutes. 

Xiao’s agency didn’t respond to requests for comment.
At a meeting the next day, Sun Lijun, then head of China’s domestic-security force, confirmed that China’s government was surveilling the Journal in Hong Kong at Malaysia’s request, including “full scale residence/office/device tapping, computer/phone/web data retrieval, and full operational surveillance,” according to a Malaysian summary of that meeting.

Chinese official Xiao Yaqing, seen at a June summit of China’s ‘Belt and Road’ program of building infrastructure in dozens of other countries. 

“Sun says that they will establish all links that WSJ HK has with Malaysia-related individuals and will hand over the wealth of data to Malaysia through ‘back-channels’ once everything is ready,” the summary reads. 

“It is then up to Malaysia to do the necessary.”
It couldn’t be determined whether China provided any information. 

Sun didn’t respond to requests for comment.
A Journal spokesman said, “We employ experts on security and cybersecurity to work with our journalists on safety and secure communications with sources of information.”

Derailed
Malaysia has frozen work on a Chinese-funded project called the East Coast Rail Link amid concerns its cost was inflated to divert money to help pay off the debts of 1Malaysia Development Bhd.
Sun also promised to use China’s “leverage on other nations” to get the U.S. and others to drop their 1MDB investigations, according to the meeting summary. 

The Justice Department investigation continued, as did probes in Singapore, Switzerland and elsewhere.
At one meeting, the Malaysians asked that the Chinese state company that would build the rail link assume $4.78 billion of 1MDB debt, a plan they hoped China would agree to quickly “due to the time sensitive nature” of the fund’s debts, according to the documents.
A Chinese negotiator worried this would be “very noticeable” in financial statements of the builder, China Communications Construction Co. , meeting minutes show.
A month later, the Malaysians proposed that Chinese state companies instead make payments that would “indirectly be used to repay 1MDB debt,” according to meeting minutes.
Notes of a discussion on Sept. 22, 2016, say the sides agreed to move ahead with the infrastructure deals even though “they may not have strong project financials.”
Participants needn’t “waste time studying the actual project financials to see if they can sustain the debt etc.,” because Malaysia’s government backed the deals for "strategic" reasons, the documents say.
Notes from that meeting said Malaysia was working to enhance bilateral ties, citing support Najib voiced for China’s position in the South China Sea during a regional summit in Laos.
Two months later, Najib went to Beijing and signed the deals. 

Together with other projects, they made Malaysia the second-biggest recipient of One Belt, One Road funding after Pakistan.
Money was flowing by the middle of 2017 as the Export-Import Bank of China issued the first loans. By fall the bank had paid out 80% of the $2.5 billion pledged to state-owned China Petroleum Pipeline Bureau to build the pipeline, although little work had been done, according to Malaysian officials.

Malaysian Prime Minister Mahathir Mohamad, center, suspended plans for Chinese companies to build costly rail and pipeline projects in Malaysia. 

When campaigning for Malaysian parliamentary elections began early in 2018, China openly sided with Najib, its ambassador at one point campaigning with members of his coalition. 

Against the odds, Mr. Mahathir, a prominent former prime minister then 92 years old, led his coalition to victory.
Now, Mr. Mahathir is negotiating with Beijing over potential new terms for the railroad project and seeking the return of Low. 

Excavators for the rail projects are idle, and workers’ quarters are vacant. 

Mr. Mahathir is expected to cancel the pipeline deal.

China’s ‘Belt and Road’ Plan in Pakistan Takes a Military Turn

Under a program China insisted was peaceful, Pakistan is cooperating on distinctly defense-related projects, including a secret plan to build new fighter jets.
By Maria Abi-Habib

A Chinese rocket boosting two Pakistani satellites into orbit from Jiuquan, China, in July.

ISLAMABAD, Pakistan — When President Trump started the new year by suspending billions of dollars of security aid to Pakistan, one theory was that it would scare the Pakistani military into cooperating better with its American allies.
The reality was that Pakistan already had a replacement sponsor lined up.
Just two weeks later, the Pakistani Air Force and Chinese officials were putting the final touches on a secret proposal to expand Pakistan’s building of Chinese military jets, weaponry and other hardware. The confidential plan, reviewed by The New York Times, would also deepen the cooperation between China and Pakistan in space, a frontier the Pentagon recently said Beijing was trying to militarize after decades of playing catch-up.
All those military projects were designated as part of China’s Belt and Road Initiative, a $1 trillion chain of infrastructure development programs stretching across some 70 countries, built and financed by Beijing.
Chinese officials have repeatedly said the Belt and Road is purely an economic project with peaceful intent. 

But with its plan for Pakistan, China is for the first time explicitly tying a Belt and Road proposal to its military ambitions — and confirming the concerns of a host of nations who suspect the infrastructure initiative is really about helping China project armed might.
As China’s strategically located and nuclear-armed neighbor, Pakistan has been the leading example of how the Chinese projects are being used to give Beijing both favor and leverage among its clients.
Since the beginning of the Belt and Road Initiative in 2013, Pakistan has been the program’s flagship site, with some $62 billion in projects planned in the so-called China-Pakistan Economic Corridor. 

In the process, China has lent more and more money to Pakistan at a time of economic desperation there, binding the two countries ever closer.
For the most part, Pakistan has eagerly turned more toward China as the chill with the United States has deepened. 

Some Pakistani officials are growing concerned about losing sovereignty to their deep-pocketed Asian ally, but the host of ways the two countries are now bound together may leave Pakistan with little choice but to go along.
Even before the revelation of the new Chinese-Pakistani military cooperation, some of China’s biggest projects in Pakistan had clear strategic implications.
A Chinese-built seaport and special economic zone in the Pakistani town of Gwadar is rooted in trade, giving China a quicker route to get goods to the Arabian Sea. 

But it also gives Beijing a strategic card to play against India and the United States if tensions worsen to the point of naval blockades as the two powers increasingly confront each other at sea.
A less scrutinized component of Belt and Road is the central role Pakistan plays in China’s Beidou satellite navigation system. 

Pakistan is the only other country that has been granted access to the system’s military service, allowing more precise guidance for missiles, ships and aircraft.
The cooperation is meant to be a blueprint for Beidou’s expansion to other Belt and Road nations, however, ostensibly ending its clients’ reliance on the American military-run GPS network that Chinese officials fear is monitored and manipulated by the United States.
In Pakistan, China has found an amenable ally with much to recommend it: shared borders and a long history of cooperation; a hedge in South Asia against India; a large market for arms sales and trade with potential for growth; a wealth of natural resources.
Now, China is also finding a better showcase for its security and surveillance technology in a place once defined by its close military relationship with the United States.
“The focus of Belt and Road is on roads and bridges and ports, because those are the concrete construction projects that people can easily see. But it’s the technologies of the future and technologies of future security systems that could be the biggest security threat in the Belt and Road project,” said Priscilla Moriuchi, the director of strategic threat development at Recorded Future, a cyberthreat intelligence monitoring company based in Massachusetts.

The Chinese-built and operated port in Gwadar, Pakistan.

An Asset on the Sea
The tightening China-Pakistan security alliance has gained momentum on a long road to the Arabian Sea.
In 2015, under Belt and Road, China took a nascent port in the Pakistani coastal town of Gwadar and supercharged the project with an estimated $800 million development plan that included a large special economic zone for Chinese companies.
Linking the port to western China would be a new 2,000-mile network of highways and rails through the most forbidding stretch of Pakistan: Baluchistan Province, a resource-rich region plagued by militancy.
The public vision for the project was that it would allow Chinese goods to bypass much longer and more expensive shipping routes through the Indian Ocean and avoid the territorial waters of several American allies in Asia.
From the beginning, though, key details of the project were kept from the public and lawmakers, officials say, including the terms of its loan structure and the length of the lease, more than 40 years, that a Chinese state-owned company secured to operate the port.
If there was concern within Pakistan about the hidden costs of the China-Pakistan Economic Corridor, also known as CPEC, there was growing suspicion abroad about a hidden military aspect, as well.

Prime Minister Nawaz Sharif of Pakistan, center left, praying during the formal opening of Gwadar port in 2016.

In recent years, Chinese state-owned companies have built or begun constructing seaports at strategic spots around the Indian Ocean, including places in Sri Lanka, Bangladesh and Malaysia.
Chinese officials insisted that the ports would not be militarized. 

But analysts began wondering whether China’s endgame was to muscle its way onto coastal territories that could become prime military assets — much as it did when it started militarizing contested islands in the South China Sea.
Then, Sri Lanka, unable to repay its ballooning debt with China, handed over the Chinese-built port at Hambantota in a 99-year lease agreement last year. 

Indian and American officials expressed a growing conviction that taking control of the port had been China’s intent all along.
In October, Vice President Mike Pence said Sri Lanka was a warning for all Belt and Road countries that China was luring them into debt traps.
“China uses so-called debt diplomacy to expand its influence,” Mr. Pence said in a speech.
“Just ask Sri Lanka, which took on massive debt to let Chinese state companies build a port of questionable commercial value,” Mr. Pence added. 

“It may soon become a forward military base for China’s growing blue-water navy.”
Military analysts predict that China could use Gwadar to expand the naval footprint of its attack submarines, after agreeing in 2015 to sell eight submarines to Pakistan in a deal worth up to $6 billion. 

China could use the equipment it sells to the South Asian country to refuel its own submarines, extending its navy’s global reach.

The Sahiwal coal power plant in Pakistan’s Punjab Province was one of the first and biggest projects financed and completed under the Belt and Road Initiative. Pakistan has fallen behind on payments just to operate the plant.

Deepening Debt
When China inaugurated Belt and Road, in 2013, Prime Minister Nawaz Sharif’s new government in Pakistan saw it as the answer for a host of problems.
Foreign investment in Pakistan was scant, driven away by terrorist attacks and the country’s enduring reputation for corruption. 

And Pakistan desperately needed a modern power grid to help ease persistent electricity shortages.
Pakistani officials say that Beijing first proposed the highway from China’s East Turkestan colony through Pakistan that connected to Gwadar port. 

But Pakistani officials insisted that new coal power plants be built. 

China agreed.
With CPEC under fresh scrutiny, Chinese and Pakistani officials in recent weeks have contended that Pakistan has a debt problem, but not a Chinese debt problem. 

In October, the country’s central bank revealed an overall debt and liability burden of about $215 billion, with $95 billion externally held. 

With nearly half of CPEC’s projects completed — in terms of worth — Pakistan currently owes China $23 billion.
But the country stands to owe $62 billion to China — before interest balloons the figure to some $90 billion — under the plan for Belt and Road’s expansion there in coming years.
Pakistan’s central bank governor, Ashraf Wathra, said publicly in 2015 that he had no clarity on Chinese investments in Pakistan and was concerned about rising debt levels. 

It still took him months after that to secure a briefing from cabinet officials.

Years after contracting to have China build new power plants, Pakistan still has a problem with severe electricity shortfalls.

“My main question was, ‘Do we have any feasibility studies of these projects and a cost-benefit analysis?’ Their answers were all evasive,” recalled Mr. Wathra, who has since retired.
Ahsan Iqbal, a cabinet minister and the main architect for CPEC in the previous government, said the project was well thought-through and dismissed Mr. Wathra’s account.
“No one wanted to invest here — the Chinese took a chance,” Mr. Iqbal said in an interview.
But the bill is coming due. 

Pakistan’s first debt repayments to China are set for next year, starting at about $300 million and gradually increasing to reach about $3.2 billion by 2026, according to officials. 

And Pakistan is already having trouble paying what it owes to Chinese companies.

Pakistan already builds Chinese-designed JF-17 fighter jets, like this one. Under a secret proposal, Pakistan would also cooperate with China to build a new generation of fighters.

Fighter Jets and Satellites
According to the undisclosed proposal drawn up by the Pakistani Air Force and Chinese officials at the start of the year, a special economic zone under CPEC would be created in Pakistan to produce a new generation of fighter jets. 

For the first time, navigation systems, radar systems and onboard weapons would be built jointly by the countries at factories in Pakistan.
The proposal, confirmed by officials at the Ministry of Planning and Development, would expand China and Pakistan’s current cooperation on the JF-17 fighter jet, which is assembled at Pakistan’s military-run Kamra Aeronautical Complex in Punjab Province. 

The Chinese-designed jets have given Pakistan an alternative to the American-built F-16 fighters that have become more difficult to obtain as Islamabad’s relationship with Washington frays.
The plans are in the final stages of approval, but the current government is expected to rubber stamp the project, officials in Islamabad say.
For China, Pakistan could become a showcase for other countries seeking to shift their militaries away from American equipment and toward Chinese arms, Western diplomats said. 

And because China is not averse to selling such advanced weaponry as ballistic missiles — which the United States will not sell to allies like Saudi Arabia — the deal with Pakistan could be a steppingstone to a bigger market for Chinese weapons in the Muslim world.
For years, some of the most important military coordination between China and Pakistan has been going on in space.
Just months before Beijing unveiled the Belt and Road project in 2013, it signed an agreement with Pakistan to build a network of satellite stations inside the South Asian country to establish the Beidou Navigation System as an alternative to the American GPS network.
Beidou quickly became a core component of Belt and Road, with the Chinese government calling the satellite network part of an “information Silk Road” in a 2015 white paper.

A model of China’s Beidou navigation satellite network, shown during the China International Aviation and Aerospace Exhibition in Zhuhai in November.

Like GPS, Beidou has a civilian function and a military one. 

If its trial with Pakistan goes well, Beijing could offer Beidou’s military service to other countries, creating a bloc of nations whose military actions would be more difficult for the United States to monitor.
By 2020, all 35 satellites for the system will be launched in collaboration with other Belt and Road countries, completing Beidou.
“Beidou, whatever any users use it for — whether it’s a civilian navigating their way to the grocery store or a government using it to coordinate their rocket launches — those are all things that China can track,” said Ms. Moriuchi, of the research group Recorded Future. 

“And that’s what is most striking: that this authoritarian government will be a major technology provider for numerous countries in Asia, Africa and Europe.”
For the Pentagon, China’s satellite launches are ominous.
China’s military “continues to strengthen its military space capabilities despite its public stance against the militarization of space,” including developing Beidou and new weaponry, according to a Pentagon report issued to Congress in May.
In October, Pakistan’s information minister, Fawad Chaudhry, said that by 2022, Pakistan would send its own astronaut into space with China’s help.
“We are close to China, and we are getting more close,” he said in a later interview. 

“It’s time for the West to wake up and recognize our importance.”

The Pakistani military has been a vital supporter, and securer, of China’s projects in Pakistan.

Wooing Pakistan’s Military
Though the relationship between China and Pakistan has clearly grown closer, it has not been without tension. 

CPEC could still be vulnerable to political shifts in Pakistan — as happened this year in Malaysia, which shelved three big projects by Chinese companies.
Campaigning during the parliamentary elections that made him prime minister in July, Imran Khan vowed to review CPEC projects and renegotiate them if he won. 

In September, after meeting in Saudi Arabia with the crown prince, Mr. Khan said that the kingdom had agreed to invest in CPEC too.
Pakistan’s new commerce minister then proposed pausing all CPEC projects while the government assessed them.
The moves by Pakistan’s new government angered Beijing, which was concerned they could set back Belt and Road globally.
But in Pakistan, China has a steady ally it can approach to smooth things over: the country’s powerful military establishment, which stands to fill its coffers with millions of dollars through CPEC as the military’s construction companies win infrastructure bids.
Shortly after the commerce minister’s comments, the Pakistani Army’s top commander, Gen. Qamar Javed Bajwa, hurried to Beijing for an unannounced visit with Xi Jinping. 

The meeting came six weeks before Mr. Khan made his first official visit with the Chinese president, a trip he had listed as a priority.
Statements from the military said Bajwa and Xi spoke extensively about Belt and Road projects.
Bajwa “said that the Belt and Road initiative with CPEC as its flagship is destined to succeed despite all odds, and Pakistan’s army shall ensure security of CPEC at all costs,” read a statement from the Pakistani military.
Shortly after the Beijing meeting, Pakistan’s government rolled back its invitation to Saudi Arabia to join CPEC and all talk of pausing or canceling Chinese projects has stopped.

Prime Minister Imran Khan of Pakistan went to meet Xi Jinping in China in November with high hopes for an economic deal. But few details have been announced.

But China could face another challenge to its investments: a Pakistani financial crisis that has forced Mr. Khan’s government to seek loans from international lenders that require transparency.
Throughout September, international delegations traveled to Islamabad carrying the same message: Reveal the extent of Chinese loans if you want financial assistance.
In a late September meeting with visiting officials from the International Monetary Fund, Pakistan’s government asked for a bailout of up to $12 billion. 

The fund’s representatives pressed Pakistan to share all existing agreements with the Chinese government and demanded I.M.F. input during any future CPEC negotiations — a previously undisclosed facet of the negotiations, according to communications seen by the Fund and a Pakistani official. 

The fund also sought assurances that Pakistan would not use a bailout to repay CPEC loans.
But the Chinese Embassy in Islamabad stepped up its engagement as well, demanding that CPEC deals be kept secret and promising to shore up Pakistan’s finances with bilateral loans, Pakistani officials say.
Three months after taking office, Khan still has not made good on his campaign promises to reveal the nature of the $62 billion investment Beijing has committed to Pakistan, and his government has backtracked on an I.M.F. deal.
In early November, Khan visited Xi in Beijing, a trip during which he was expected to clinch bilateral loans and grants to ease Pakistan’s financial crisis.
Instead, his government walked away with vague promises of a deal “in principle,” but refused to disclose any details.

A Chinese national flag, center at the Sahiwal coal power plant in Pakistan, which cost about $1.9 billion to build. Pakistan now owes around $119 million in back payments to Chinese companies just for operating the plant.

Global Fraud

How Asia Fell Out of Love With China’s Belt and Road Initiative
Countries are discovering that the promise of Xi Jinping’s signature infrastructure program is too good to be true.

By Iain Marlow and Dandan Li

An aerial view of the new runway built by China's Beijing Urban Construction Group at the Velana International Airport in Hulhule Island, Maldives.

In late August, President Abdulla Yameen of the Maldives hailed the opening of a Chinese-built bridge connecting two islands in the archipelago as “the gateway into tomorrow and the opportunities beyond.”
One month later, Yameen was voted out and the new government of the palm-fringed nation off the coast of India began to uncover the mountain of debt with which he’d saddled the country. 

A pro-China strongman who jailed opponents and judges, Yameen borrowed heavily from Beijing to build a new runway for the main airport, housing developments and a hospital, as well as the 2.1 kilometer (1.3 mile)-long “China-Maldives Friendship Bridge.”
On a recent trip to New Delhi, Maldives officials opened up about their frustration over the scale of the debt to China—the equivalent of almost 20 percent of GDP—and the inexplicable preference given to Chinese financing under the Belt and Road Initiative (BRI). 

In just one example, the previous government rejected a $54 million hospital bid in favor of an “inflated” Chinese offer of $140 million.
“We have been burned,” said Economic Development Minister Fayyaz Ismail.
The tourist paradise of the Maldives isn’t the only Asian nation to discover that the promise of Chinese dictator Xi Jinping’s signature infrastructure program was too good to be true.
After an unprecedented run of funding large-scale investments in projects from railways to highways in poorer countries across Asia, governments are adopting a far more cautious approach to China’s grand plans for what it regards as its backyard. 

From Malaysia to Sri Lanka, simmering voter anger over deals perceived as unfair or corrupt are prompting close examination, investigation and even suspension of projects until recently taken for granted.
“The first phase of the Belt and Road is effectively over,” said Andrew Small, a senior fellow with the German Marshall Fund’s Asia program. 

“A new model has not yet emerged, but it is clear that the old one, almost entirely focused on speed and scale, is no longer sustainable.”
Chinese authorities have noted the examples of misconduct and are reassessing and tweaking their global infrastructure plans, said a senior Chinese official who asked not to be named discussing strategy. 

They are well aware that poorly executed projects can hurt China’s reputation and are alert to the potential for resentment to spread, the official said.
Asia is in desperate need of infrastructure upgrades and no country other than China has the appetite—or the ready resources—to meet the demand for large-scale investments. 

Yet the criticism in Asia comes at a sensitive time of growing international skepticism of China’s global intentions. 

While much of the focus is on President Donald Trump’s standoff with Xi over trade, technology and market access, governments across Europe, in Australia and in Japan are tightening up their vetting of Chinese investments, particularly in critical infrastructure such as key ports and network systems.
China has commissioned internal reports that have highlighted the backlash, with the aim of continuing Xi’s outward push at a time when the economy is struggling. 

Authorities have stepped up scrutiny of BRI projects and investment and are deliberating possible regulations, the official said, adding that China is ready to take measures to clamp down on misconduct.
That translates into “more willingness to renegotiate terms, more focus on project quality, more efforts to cooperate with third-country partners such as Japan, and greater sensitivity to political and macro-economic risk,” said the German Marshall Fund’s Small.

A bulldozer working on the Chinese-financed Gwadar Port in Pakistan.

The shift in sentiment among Asian governments is already tangible, and has burst into the open in recent months. 

In Pakistan, China’s all-weather ally for decades, militants angered by Chinese investment in a remote area bombed and attacked the Chinese consulate in Karachi last month, killing seven people.
In Sri Lanka, there is growing anger over China’s vast economic influence as a threat to the country’s sovereignty, while a Myanmar government adviser criticized as “absurd” the $7.5 billion price tag for its Chinese-backed port, which was agreed to under the previous military government.
In Malaysia, Mahathir Mohamad was elected prime minister in May after questioning Chinese investments on the campaign trail. 

In office, he slammed a “new version of colonialism,” as his government moved to suspend a $20 billion Chinese railway project, and later cancelled three China-backed pipeline projects worth $3 billion.

Malaysian Prime Minister Mahathir Mohamad.

Indian officials have long objected to the Belt and Road program because it funds $60 billion worth of infrastructure in Pakistan, including in parts of disputed Kashmir, which India claims as its own.
And though New Delhi lacks the cash to compete against Beijing, Indian diplomats insist countries have been lured into debt traps and view the recent criticism as legitimizing their long-standing position. 

Indeed, a report this year by the Washington-based Center for Global Development identified eight nations at risk of debt distress from Chinese financing, among them Pakistan, the Maldives, Laos, Mongolia and Djibouti, where China has its only overseas military base.
Vietnam’s clashes with Beijing in the South China Sea meanwhile mean security fears there risk overshadowing investment projects.
Increasingly, bashing China makes sound electoral sense in parts of Asia. 

Indonesia, where the campaign for an April ballot could bring heightened scrutiny of Chinese projects, is an example of how China’s investments are often pulled into emerging market elections, according to Kelsey Broderick, an Asia associate at the Eurasia Group.
“Candidates around the world have used public concerns over Chinese debt as part of their successful challenges to incumbent candidates who have embraced BRI with open arms,” said Broderick. 

He cited Jair Bolsonaro’s successful run for the Brazilian presidency on an anti-China platform, and said Kenya, Zambia and Thailand could face similar debates.
Part of the concern comes from perceptions that, apart from contributing to unsustainable debt levels, China’s loans serve Beijing’s strategic goals in the Indian Ocean region key to global shipping routes at a time when China is building islands in the South China Sea.

The construction site for a section of the China-Laos Railway built by the China Railway Group, near Luang Prabang, Laos.

In the Maldives, former strongman Yameen’s increasingly overt pro-China policies included ramming a free trade agreement with China through parliament and denying work visas for professionals from China’s rival India. 

The strong-arm tactics ultimately backfired: New Maldivian Finance Minister Ibrahim Ameer has asked for $200 million of Indian loans and pledged to pursue an “India-first” foreign policy, a sharp rebuke to Beijing.
The Trump administration meanwhile has honed its message against the Belt and Road. 

Vice President Mike Pence told leaders at the recent Association of Southeast Asian Nations summit in Singapore that the U.S. doesn’t “offer a constricting belt or a one-way road.”
The U.S. has set up an agency to lend as much as $60 billion for infrastructure, and last month backed a plan to build a $1.7 billion electricity grid in Papua New Guinea as part of a push to provide countries with alternative lending schemes. 

Still, that number pales in comparison to the Belt and Road, which Morgan Stanley says may total $1.3 trillion by 2027.
Asia clearly needs more infrastructure: The Asian Development Bank forecasts the region needs $26 trillion worth of highways, railroads and other infrastructure over the next decade or so. 

In the absence of viable alternatives, China is likely to remain the first port of call. 

In any case, many countries in Asia and Africa still prefer Chinese loans that come with “no governance or accountability commitments,” said Broderick.
In the five years since Xi launched Belt and Road, “China has been on a learning curve,” said Pang Zhongying, an international relations professor from Macau University of Science and Technology. “It’s the right thing to do for China to reassess its BRI projects and put more emphasis on risk control.”

China Got “The Rest” Wrong

Beijing is wrong to think other countries will roll over when confronted.

by Huong Le Thu

There is an argument that the West got China wrong. 

It argues that the assumption that China’s economic opening would lead to its political liberalization and transformation into a “ responsible stakeholder ” was incorrect. 

In fact, American policy advisors even concluded that basing Washington’s policy towards China on these assumptions has been a failure . 

China is a country that not only has taken advantage of the rules-based world order but also one that got away with it abusing it.

China has grown into a monstrous economic power that is not constrained by the global rules, but instead is a “ ruthless stakeholder .”
Indeed, China is providing more and more evidence that it is not willing to abide by international law and does not hesitate to act unilaterally in matters it considers critical for its interests—such as in the South China Sea. 

Beijing’s four-no’s strategy to ignore the Arbitral Tribunal ruling from 2016—no participation, no acceptance, no recognition and no enforcement—remains one of most striking examples of open disregard for the rules-based international order. 

China's ability to shake the current order is hard to deny, but it has not necessarily reached its desired position and still is at risk of a stronger push-back from other countries.
China’s military activities in the South China Sea are not only a concern for its direct neighbors and claimants in the disputed waters; they present high risks and unwelcomed tensions to an already unstable region. 

Despite earlier assurances from China that it is not militarizing the artificial islands built in the South China Sea, the continued show of force undermines Beijing’s credibility and peaceful intentions. Military build-ups and actions have also become more prominent in the Taiwan Strait, where recently Beijing conducted war games . 

The question is why is Beijing risking its reputation, and potentially even confrontation, instead of asserting its global position peacefully?
Xi Jinping’s China is ambitious not only in laying out its strategic vision of a new order, but also in racing against time to implement that vision. 

That dream has many facets well beyond militarising artificial islands in the South China Sea. 

The Belt and Road Initiative (BRI) involves building ports in places ranging from Africa’s Djibouti to wharves in Vanuatu in the Pacific. 

China’s BRI also includes securing access to sea and land-routes globally—from the Arctic to Latin America—as well as proposing new global institutions such as the Asian Infrastructure Investment Bank (AIIB). 

These are all elements of a unified plan for the extension of China’s global reach . 

Finally, all of these massive and potentially game-changing projects are seen as Xi Jinping’s flagship initiatives.
Beijing's strategy to attain dominance has been primarily based on two key components. 

The first is incrementally asserting its territorial claims, even if doing so often includes open disregard for the rule of law. 

The second is offering economic inducements for states to play ball while forging close relationships with key political and business leaders, often with financial incentives.
By many accounts, China's aggressive tactics in the South China Sea seem to have been successful, by both effectively undermining the rules-based order while continuing to expand the range of its Beijing's operations. 

Whether the international community will respond stronger to China's growing arrogance remains a question, but one thing is sure—while the international community keeps pondering, Beijing has managed to gain the time necessary to further its military plans.
Another issue that concerns more actors globally is China's economic statecraft. 

Initially, the BRI projects have been hailed as both the most significant change in global history and China’s gift to the world. 

In fact, many enjoyed the excitement of the new economic and transportation infrastructure opportunities that Chinese initiatives offered. 

Beijing's generosity has been well received, but not without varying levels of reservations about the political implications of Chinese money. 

Furthermore, the global context has helped to strengthen this perception. 

For example, the U.S. protectionist agenda, the Europian Union's self-absorption, and Japan's low-profile economy have only boosted the view that China is filling a void in global leadership. 

After all, China's global projects of the BRI and the AIIB gained the support of even those who had ongoing territorial disputes with China, including India, Malaysia, Vietnam, and the Philippines.
Yet, the Belt and Road Initiative—perhaps the most anticipated project among the developing economies—has become a subject of skepticism and scrutiny. 

For instance, debt traps and compromised national strategic assets have become the most feared outcomes of the BRI. 

Furthermore, Sri Lanka's case of its ill-fated Hambantota Port remains the poster-warning for many. Sri Lanka's $1 billion in Chinese loans were used as leverage to give Bejing a controlling interest in, and ninety-nine-year lease over, the Hambantota Port. 

As a result, the perception that Chinese aid and loans are a trap is spreading around the South Pacific islands.
Also, something has changed over the past months, and there is a growing wave of push-back from around the globe led by "natural rivals," too-close-to-comfort neighbors, and even more distant countries. 

Concerns have also been voiced by countries who have no geographical security concerns vis-à-vis China, like New Zealand or the Czech Republic . 

While the scale and intensity of push-back vary, one concern is universal—that Chinese economic initiatives translate too directly into the capacity to extort political influence over the recipient country. 

For example, to some degree, most Chinese preferences have been incrementally met over the years through international support for Beijing and silence on its taboo topics such as Taiwan, Tibet and human rights. 

But China's political influence now exceeds many other countries' levels of tolerance—particularly given Bejing's influence includes meddling with economic partners' domestic politics.
In Australia, for example, there is an ongoing debate over Chinese influence. 

This includes Four Corners, a report released in June 2017, which exposed the personal connections of Chinese-born business people, not only with Australian politicians but also with high ranking UN officials. 

In America, concerns are stronger over Russian meddling into U.S. domestic politics, but the Chinese presence at universities is also a matter of a widespread discomfort. 

Reports show that the Chinese Community Party has been setting up ‘cells’ at the University of Illinois, while the Chinese Students Scholars Associations (CSSAs) across the country have been distributing money for activities and engagement praising the Chinese government. 

Elsewhere, in Central Europe, the concern about Chinese state influence is not a distant concept either. 

A website, called Chinfluence, collects the cases of Chinese political and economic influence in the Czech Republic, Slovakia and Hungary.
China's fast-lane to global influence has been pursued through the exploitation of that most common of human weaknesses—greed and fear. 

Aiming at the top leadership and by-passing lengthy processes through corruption has proved effective for Bejing. 

But only for short-term and in certain countries.
Seeking to influence politicians is rather costly and can be only useful in the short term. 

In democratic countries, the political mandate is comparatively short, although former politicians can remain influential and high profile public voices. 

In the case of Australia, former Labour Senator Sam Dastyari demonstrates China’s attempts to cultivate influence and how it could backfire. 

Financial donations from an Australian-Chinese businessman, combined with public statements that seemed to echo the Chinese state’s line on the South China Sea, brought about the end of Dastyari’s political career. 

It also fuelled an ongoing debate over legislative changes relating to foreign interference and foreign donations.
Malaysia’s May general election, which overthrew Najib Razak and over sixty years of his party’s rule also shows the risks for China in building relationships with selected individuals. 

China’s top-down mindset dictates its strategy of forging relationships with targeted individuals, which is effective and fast in the short-term, but which fails to build a foundation for long-term. 

In other words, China fails to institutionalize relationships that stretch beyond personal connections with those leaders should they fall or leave office.
Najib Razak of Malaysia, Hun Sen of Cambodia, and Rodrigo Duterte of the Philippines all fit into this template. 

So far, only Hun Sen—who has dissolved his opposition party heading to the July elections—has proved the strategy useful. 

In addition, Duterte has proven to be a game-changer in the lawfare in the South China Sea by disregarding the legal victory from the Tribunal Arbitral ruling for the sake of improving relations with Beijing. 

But, as a populist leader, he is also subject to his nation’s swinging mood.
In contrast, China’s relationship with Vietnam is an example of a relationship which does involve a few long-standing and close affinities extending beyond personal benefits. 

Based on a party-to-party relationship, Hanoi and Beijing have developed a history of close ties dating back a couple of decades. 

Yet, instead of nurturing that relationship, Beijing’s rush to assert its position in the South China Sea has pushed its fellow communist regime away. 

In fact, that rift has been to the degree that even though Hanoi is traditionally suspicious of America, Vietnam has invited an American aircraft carrier to visit and is working on strategic partnerships with Washington and its allies. 

Given the size and importance of Vietnam, the costs to the Chinese state in its relationship with Hanoi might seem insignificant in comparison to Beijing’s perceived value of the South China Sea claims. 

But souring the relationship with Vietnam—including recently preventing it from conducting oil and gas explorations or China’s dispatching of long-range bombers to the Paracels—is hurting its relationships by stirring up the otherwise relatively pacified periphery.
Trump’s erratic leadership in global affairs does provide a strategic opportunity for China to fill that gap. 

Xi Jinping is astute in seizing this opportunity. 

In fact, China would be welcome to fill in the global leadership void on many critical issues, such as climate change, trade and infrastructure development. 

But while Xi’s vision of a “community of common destiny” is attractive in various ways for many economies around the world, China's execution of the vision invokes increasing unease, including among those who do not have strategic connections with Beijing. 

China's grand plans to achieve national rejuvenation by 2049 sounds impressive, but the tactics it applies are creating tensions. 

Xi Jinping's ambitious and impatient strategy of assertion is insensitive to fellow "common community" members' values, interests and needs. 

Additionally, it is a missed opportunity for global leadership and contradicts the rhetoric of international harmony and ‘win-win' behavior. 

Leaders supporting Beijing are also driven by the pursuit of immediate gains, seeking economic benefits rather than long-term common beliefs and solidarity. 

China is doubling down on a costly strategy of buying "followers" rather than winning the hearts and minds of friends and partners. 

This is neither an effective nor an efficient strategy.