China’s ‘pledge trap’: Will others step in?

“We stand against unilateral sanctions, economic coercion, decoupling and supply chain disruption,” Chinese paramount leader Xi Jinping declared during the summit marking the 10th anniversary of the Belt and Road Initiative (BRI).

Xi railed against American sanctions against China’s tech titans and national champions, which have struggled to source high-end microchips and other critical inputs from traditional partners in the West in recent years. Instead, he presented his country as a champion of free trade and global connectivity.

China’s paramount leader signed a total of $97.2 billion worth of cooperation projects and announced an additional $11 billion for the Silk Road Fund as well as another $100 billion to buttress financing by China’s state-dominated financial institutions to further bankroll the BRI. Luckily for the Chinese leader, he didn’t lack cheerleaders in the audience.

The mega-event brought as many as 1,000 delegates to Beijing, including 23 national leaders, including controversial Hungarian Prime Minister Viktor Orban and Russian President Vladimir Putin, who has been disinvited to other major events due to a pending International Criminal Court warrant of arrest over his catastrophic war against Ukraine.

Ahead of the summit, Beijing published a white paper that maintained that “the ultimate goal of the BRI is to help build a global community of shared future.” In effect, the BRI, a $1-trillion initiative to remake global infrastructure with Chinese characteristics is a core element of China’s global development initiative, which seeks to establish a Beijing-led international order.

Despite all the tough talk and big announcements, however, it’s clear that the BRI is losing steam — mirroring China’s own economic slowdown. Over the past five years, China’s BRI-related activities have been down by as much as 40 percent. Add to this, disruptions to global supply chains due to pandemic-related lockdowns and restrictions. China is facing domestic criticism from disgruntled citizens and is struggling due to its weakening economy.

Crucially, China is also facing a plethora of obstacles in partner nations. An authoritative research report by scholars at Boston University showed that “many of the recipients of Chinese finance are subject to significant debt distress.” In fact, Beijing has had to spare $240 billion to bail out BRI recipient nations across the developing world, most dramatically in the case of Sri Lanka and a whole host of African nations.

In the Philippines, however, what we have seen is less of a “debt trap,” namely China ensnaring recipient nations with unsustainable lending, but instead a “pledge trap,” namely extraction of geopolitical concessions in exchange for illusory gains.

Pro-Beijing pundits and “experts” love to emphasize the huge size of two-way trade between China and the Philippines. What they fail to mention, however, is how lopsided this trade is in favor of Beijing, whose heavily subsidized exports have driven many Filipino manufacturers (think of Marikina’s once enviable shoe industry) out of business.

Crucially, they also conveniently overlook how China has yet to honor any of its big-ticket infrastructure projects, which were promised to former president Rodrigo Duterte back in 2016! Sure, one can easily blame the Philippines’ notorious bureaucracy and poor investment conditions. But one wonders if Beijing was ever sincere with all of those mega-pledges to begin with.

Referring to $4.9 billion of Chinese-backed railway projects, Transportation Secretary Jaime Bautista recently lamented: “We have three projects that won’t be funded by the Chinese government anymore. We can’t wait forever and it seems like China isn’t that interested anymore.”

Sen. Sherwin Gatchalian, an especially wonky legislator closely following foreign investments, pointed out how many of China’s projects have been “delayed due to the implementation of the right of way and bidding.” But he also emphasized how China’s projects tend to have more onerous terms of payment compared to Japan’s and indirectly recognized potential national security concerns due to festering tensions in the West Philippine Sea.

As a result, as many as six big-ticket Chinese projects — including, the Samal Island-Davao City Connector project, the Chico River Pump Irrigation Project, and the Kaliwa Dam Project — are now being “reconsidered” by the Marcos administration. Critics may say “good riddance!” Considering falling foreign direct investments over the past year, however, it’s clear that our traditional Western partners will not fill in the vacuum unless we institute major reforms at home.

rheydarian@inquirer.com.ph