China's Belt and Road initiative is in its 10th year. Has it been a success?
SCOTT SIMON, HOST:
President Biden's at the G-20 summit in India. The official agenda centers around climate change and economic security. An unofficial goal, at least for the U.S., is to try to provide an alternative to a rising China. For the past decade, China has used its so-called Belt and Road Initiative to create better relations through massive infrastructure loans. Nearly 150 countries have participated. Giulio Pugliese teaches Europe-Asia studies at the European University Institute. He joins us now from Rome. Thanks so much for being with us.
GIULIO PUGLIESE: Thanks for having me.
SIMON: First, help us understand what China set out to do 10 years ago with Belt and Road, and has it worked?
PUGLIESE: Sure. Effectively, the fundamentals of the Belt and Road Initiative are economic. China has tried to export its overcapacity, which couldn't be met by domestic demand, by effectively engaging in massive infrastructure loans, as you mentioned. And it's near abroad to start with. That's why it was announced in Central Asia and Indonesia precisely 10 years ago. And with a little bit of help from the central propaganda department, the Belt and Road effectively became a grand strategic narrative about China's unstoppable rise and its willingness to harness the markets of emerging countries and developing economies to provide loans for infrastructure and, through those loans, foster better relations with what China would claim is going to become the first and largest economy in the world.
And so this was a win-win game where China would have had more interactions, economic interactions with these countries, also through trade eventually but especially at the beginning with investment loans. And this would have also guaranteed the Chinese subcontractor companies to work on these infrastructure projects, export its industrial champions and, through that economic interaction, deepening interaction, have bigger, larger, deeper political heft.
SIMON: Italy has participated, hasn't it?
PUGLIESE: Yes. And this was a very peculiar moment in Italian history where a populist government wanted to take back control, to paraphrase Brexit, away from Brussels and claim that they would be able to show results by signing deals with countries with which Italy was traditionally a bit shy, such as China. And so the result of all this, to cut a long story short, was to do a very symbolic and shallow memorandum of understanding with China in March of 2019 to show that Italy was about to harness a better relationship with China, to have more access to the Chinese market through a rather symbolic political statement.
SIMON: Has China's strategy been successful?
PUGLIESE: No. It has received a major pushback. And this was the unfortunate thing for Italy. That pushback, especially from the U.S., was brewing in 2018, but it really kick-started in 2019. And so there was international pushback against China's perceived neocolonial infrastructure project. And at the same time, it now has a lot of problems domestically because there has been not just that trap diplomacy on the recipient countries' side but also on China's side, meaning that Chinese loans do not necessarily then equate in strategic collateral or, in fact, on the ability of those recipient countries to pay back those Chinese loans.
SIMON: So there are countries that are just not paying the loans back to China?
PUGLIESE: Right. China has policy banks, and public finances do find themselves in a tight spot, especially as China's economic growth, as we're witnessing these days, is not as taken for granted as it used to be.
SIMON: Do you think China will increase the investment it's going to make in the Belt and Road program now, or does it have the wherewithal to do that right now?
PUGLIESE: That's a very interesting question because it ties back to the analysis of China's economic woes. China is scaling back down many of its very deep-pocket-based infrastructure loans. But China is nonetheless the second-largest world economy, and it makes perfect economic sense to, of course, foster markets and economies from which it can import commodities or through which it can actually export its own industrial champions and its overcapacity. So I think that it's scaling back down, but it's too early to declare its death, that's for sure.
SIMON: Giulio Pugliese of the European University Institute, thank you so much for being with us.
PUGLIESE: Thank you.
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