Even after surmounting domestic obstacles, there is the question of whether or not the loans funding the infrastructure projects along the economic corridors will avoid becoming non-performing. Broadly speaking, Chinese state-run banks have been criticized for the careless misallocation of capital, resulting in non-performing loans to SOEs and foreign states with massive debts to China, such as Venezuela’s staggering US$65 billion debt to China (Zhang & Miller, 2017). This is reflective of questionable loan approvals by Chinese state-run banks that prioritize the CPC’s political agenda over actual commercial returns, a situation of startling similarity to its domestic lending practices, particularly in western China, which has created an asset bubble with no real return on investment. The reliability of South Asian and especially Central Asian economies and their ability to produce returns on these infrastructure projects and loans are also in doubt, as seen with the indefinite suspension of Line D of the Central Asia-China gas pipeline, which would’ve been a major step towards regional integration and is now a major blow to Turkmenistan’s energy economy agenda (Michel, 2017).
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The reliability of the economies in which the BRI is meant to invest in is suspect, as reflected in the hesitance and reluctance of the Chinese private sector to invest. The succession crisis for Kazakhstan’s strongman president, Nursultan Nazarbayev, has also attracted concern that the subsequent political turmoil may cut into by far Central Asia’s largest economy, exacerbating issues such as drops in international oil prices and risks from a small banking sector (Global Credit Research, 2017). All this is compounded by existing corruption in Central Asia, which has generally deterred or even disrupted foreign investments into the region (O'Casey, 2017). Over the long term, this may threaten not only the viability of the BRI in terms of linking economies together productively, but also challenge China’s ability to further manage credit, especially if this item should be considered a time limit by which China needs to achieve its economic reforms to weather out the blowback from multiple non-performing loans. This puts into question the extent to which the CPC has learned from its policy mistakes during the Western Development Strategy, and whether or not connecting inland China as a trade hub to Central Asia via economic corridors can actually address longstanding issues in the region, especially if SOEs will continue to lead the effort in the BRI over China’s more financially cautious private industries, given the official Chinese rhetoric on allowing the market to “play a decisive role in resource allocation”, in line with China’s economic reform agenda (Zhao, 2017).
Aside from the economics, there are also social dimensions at work. At least one Chinese researcher writing for a domestic academic journal has chastised the Chinese media for describing the BRI as an avenue for exporting China’s excess production
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capacity, recognizing that neighboring polities may not be enthused about the idea of taking China’s leftovers. More so than the author’s insistence that this issue should be reframed and re-emphasized by the media as a mutually-beneficial “win-win”
arrangement that takes advantage of China’s “production advantage”, it is more interesting to note that a paper in a Chinese academic journal explicitly does not deny that, in spite of the suggested media spin, the BRI is not about “taking China’s leftovers”
(Zhang L. , 2015). Just as interesting would be how China’s neighbors may factor this into their own decision-making rubric; more so than any accusations of cheek on the part of the Chinese, one only needs to look at the U.S. and Europe to see them fortifying themselves against Chinese dumping strategies.
Increased Chinese involvement in Central Asia and the Middle East also creates the potential in which China is drawn into local tensions, not only to protect its overseas interests, but also as a matter of diplomatic policy. China must inevitably maintain its interests in the Middle East, and the BRI is reflective of this. As previously mentioned, sixty percent of China’s energy consumption is reliant on imports, and sixty percent of those imports come from the Middle East. The Silk Road Economic Belt envisions an economic corridor that reaches as far as Iran. The Maritime Silk Road runs through not only the Indian Ocean, which contains eighty percent of the world’s seaborne oil trade, but also the Gulf of Aden and the Red Sea, putting it in contact with Saudi Arabia. By engaging in the region, China risks being drawn into the broader conflict between the Sunni-Shia sectarianism in general and the Iran and Saudi Arabia in particular, despite attempting to take a “business is business” approach in the Middle East and elsewhere.
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Iran is in a more strategically vital position for the SREB, an increasingly important corner of China’s strategy in diversifying its oil imports, a potential burgeoning market, and the destination of planned extents of pipelines running from China through Central Asia (Payne, 2016). By contrast, Saudi Arabia is not a direct beneficiary of the BRI in its original form, but is of significant importance to present Chinese energy security, as the Saudis make up the largest share of China’s oil imports, coming up at 16% as of 2014, with Iran only at 9% (U.S. Energy Information Administration, 2015).
Just as previous foreign powers learned when doing business in the Middle East, it is nearly impossible to not take sides, or at least to not be perceived as taking sides, in the Middle East once a foreign state is embroiled in regional politics, and only time will tell if China also needs to choose sides in spite of its alleged dedication to “business is business”, such as if Saudi Arabia begins to wonder the worth of strong diplomatic ties with China when China is also strengthening Iran (Payne, 2016).
It isn’t necessarily just state actors that factor into risks for China’s BRI. China is ultimately connecting its western provinces, key among them Xinjiang, to Central Asia and Pakistan, and also to the Middle East further beyond, all of the Muslim-majority areas. While most of these governments, particularly in Central Asia and Pakistan, have been friendly to Beijing and restrained in any criticism of perceived repression against the Chinese Uyghur minority, their constituents do not always take such accommodating views, and extremists groups within these areas, particularly in Pakistan and the Middle East, have supported the independence of “East Turkestan”. The perpetrators of terror attacks in western China have allegedly been trained under groups such as al Qaeda and
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the Islamic State in particular, but also with similar extremist groups in Afghanistan, Pakistan, and Syria in general. The increasing connectivity and involvement with these Muslim majority regions may lower possible barriers for extremist groups to further perpetrate and train for future attacks, not only in western China, but also against Chinese interests in regions connected by the BRI.
The norms by which Chinese infrastructure investments projects are handled abroad has also proved to be a major challenge to Chinese soft power, a critical component in the ideals of the BRI where “people-to-people” relations are concerned.
This concern is driven in part because Chinese-invested infrastructure projects have generally been managed by Chinese enterprises using a Chinese labor force, often at the expense of employment opportunities for the local population, which may not be beneficial to the long-term feasibility of economies reliant on investments from the BRI (O'Casey, 2017). In cases where a local workforce is hired alongside Chinese labor, accusations of Chinese chauvinism and prejudice are rife, sentiments that are hardly conducive to “people-to-people” relations or even good diplomatic relations, nor would it be particularly successful in heading off claims of Chinese neocolonialism.