China wants Canadian private investment in Belt and Road projects, amid scrutiny

China wants Canadian private investment in Belt and Road projects, amid scrutiny

OTTAWA — China’s ambassador in Ottawa says he wants Canadian business to collaborate with Beijing on its Belt and Road Initiative, amid scrutiny from Western governments.

Ambassador Cong Peiwu says Canada can use the initiative to reduce global carbon emissions and fight poverty.

He rejects warnings by Canada’s peers that the plan allows Beijing to coerce developing states.

Here’s a look at what China is proposing and why some are raising the alarm.

What is Belt and Road?

The Belt and Road Initiative is a massive infrastructure plan that aims to connect Asia, Europe and Africa through a series of railways, ports, bridges and coal plants, some of which follow trade routes used along the ancient Silk Road.

It’s expanded even further, with projects that include a major highway in Jamaica and power plants in Bolivia.

Beijing launched the initiative a decade ago. The Chinese Communist Party government says the intent is to replicate China’s own rise out of poverty by stimulating growth in developing countries.

The Canada West Foundation says BRI projects are key to understanding Beijing’s relations with other countries — and its effort to boost the country’s reputation across the Global South.

“It is part foreign influence tool, part international development project and a lot of making China more competitive,” reads an analysis from the Calgary think tank. “The BRI creates both opportunities and challenges.”

Beijing argues the initiative does not aim to spread its model of governance, but experts say it nonetheless represents a challenge to Western influence because it gives China leverage over supply and production chains.

Who supports the initiative?

UN Secretary General António Guterres has praised the initiative as a model for co-operation among countries in the Global South, saying it has “immense potential” to boost living standards and slow climate change.

“We can turn the infrastructure emergency into an infrastructure opportunity,” he said last October.

In 2019, the World Bank estimated that the Belt and Road Initiative could contribute to lifting 7.6 million people from extreme poverty, as well as 32 million from moderate poverty. That’s in large part because it connects far-reaching rural regions with economic opportunities and cheaper goods.

Many developing countries hosting BRI projects argue the funding is much accessible than what Western institutions provide, and that it better corresponds to local governments priorities.

Yet an analysis by the Munk School of Global Affairs and Public Policy notes that this praise often comes from autocratic countries that are pursuing projects Western financiers have deemed too risky, particularly amid armed conflict in Myanmar and Pakistan.

What criticism does it face?

American think tanks have derided the initiative for its environmental impacts, and allegations that China uses the project as a tool of economic coercion.

After helping construct coal plants, Beijing changed the plan last fall to focus on mitigating climate change and preventing corruption.

But global financing bodies like the World Bank are still asking for more transparency in how projects are funded to guard against “debt-trap diplomacy,” which is when a country is given a loan it likely cannot pay and then must compensate by transferring assets or taking certain political stances.

Critics point to Sri Lanka, which took on large amounts of debt, especially from China. When it struggled to repay that debt, it ended up giving Beijing control of a strategic port in Colombo.

China pushes back on claims it engages in predatory lending, arguing it makes its expectations clear to developing countries. It chalks up debt issues to rocky economic recoveries after the COVID-19 shocks.

“China is doing its best, not only to help the people of China to live better lives, but also at the same time, to make contributions to international peace and prosperity,” Cong said in an interview with The Canadian Press.

“(If) someone is suggesting China is a disruptive global power, that certainly is not in line with the facts.”

Why is China looking for new investment?

China has spent US$1 trillion on the initiative so far, but scaled back in recent years as some countries have grappled with project debts.

Chinese President Xi Jinping marked the initiative’s first decade last October by saying it would shift “from physical connectivity to institutional connectivity,” with an emphasis on digital infrastructure, training and international student exchanges.

Carleton University professor Jeremy Paltiel said that reflects BRI projects going sideways in countries burdened by red tape, instability and bad governance, causing China to change tack.

“They’ve been burned, and they’re now talking about high-quality investments,” said Paltiel, who specializes in Canada-China relations. “They also may have less money to spend, because the Chinese economy has not been doing that well.”

Beijing has stopped reporting youth unemployment data following unflattering figures, while India has outpaced China as the world’s most populous country.

Stock markets in China and Hong Kong are facing strong headwinds, with equity dropping by more than a third since a 2021 peak, just as American and Indian stocks rose. And Beijing has intervened to try stabilizing a shaky property market.

What is Beijing’s pitch for Canadian investors?

Ambassador Cong is issuing a call for corporate Canada to directly invest in BRI projects in third countries.

“Canada is also emphasizing a lot on the green economy, and their transition to a low-carbon and circular economy. So I think we’d be interested in doing things like that — not only bilateral, but also fully multilaterally, in that arena,” he said.

Cong said Canadian corporations should consider visiting China and looking at how they can reap returns on these projects while contributing to a better world.

That’s different from having Ottawa or provinces hold a financial stake, or China building infrastructure in Canada. Instead, pension funds and private investors would help finance projects in third countries.

In addition, Cong said Canadian companies could win lucrative contracts to build projects. He gave the example of the American elevator company Otis helping to build train stations in Egypt through the BRI.

He said Canadian companies could rely on goods made in Canada or abroad; he noted that China opened its manufacturing sector to more foreign investment this year.

“Currently, I have no specific information for whether Canadian enterprises have been in (BRI) projects, but I believe there are huge potentials for that,” Cong said. “I understand that some of them are really interested.”

What have Canada’s allies done?

Washington is very hostile to the BRI. Annual reports to Congress on U.S.-China Commercial Relations call out the initiative as destabilizing the world by compromising national sovereignty and expanding the use of surveillance technology.

“China refuses to offer broad and substantial debt relief or restructuring to developing countries in distress,” reads its 2023 report.

Australia, a member of the Five Eyes intelligence alliance alongside Canada, kiboshed two BRI deals struck by one of its states in 2021, saying vaguely that they were “inconsistent with Australia’s foreign policy or adverse to our foreign relations.”

One of Australia’s major ports, Darwin, is part of the BRI through a 99-year lease signed in 2015. The U.S. raised security concerns over that lease, though Australia opted last October to maintain the deal after a risk analysis.

Italy, which like Canada is a G7 country, signed onto the BRI in 2019, seeking an investment boom after a series of recessions and rising skepticism toward the European Union.

The country now plans to withdraw, arguing it did not yield economic benefits and created tensions with allies.

Should businesses be cautious?

The Canada West Foundation says the initiative is already affecting how Canadian companies and development projects operate in countries ranging from Indonesia to Nigeria.

It notes that Canada’s engineering and design sectors could gain from global contracts, and that an increase in critical infrastructure could help boost exports — both for Canadian firms and their foreign competitors.

But Paltiel said any Canadian company involved in a BRI project would likely face some criticism — especially from south of the border.

On the plus side, in areas like Southeast Asia, Western-backed BRI projects could resonate with countries that lament feeling like they must choose loyalty to either China or the U.S., he said.

“I don’t think it’s a Trojan horse, said Paltiel. “Obviously it does buy China a lot of influence.”

This report by The Canadian Press was first published Feb. 24, 2024.

Dylan Robertson, The Canadian Press