The context of this research and argument for the BRI is specifically within the scope of the fifth-generation leadership, and is predicated on two trends consistent with Chinese leadership: That Chinese administrations generally serve for a limit of two five-year terms, and that landmark policies set by previous generations of Chinese leadership may not survive in its original form or even meaningfully affect policy in the next generation. This research thus assumes that Xi will step down as general secretary in 2022 and president in 2023, and that whoever succeeds the fifth-generation will not be obligated to carry out the BRI in the way the fifth-generation leadership envisioned it, if at all, though existing institutional, economic, and diplomatic momentum may cause them to do so regardless.
The good news for the Xi administration is that successive generations of Chinese leadership generally tend to recognize the same trends in China, even if their responses to them are different. Even though Jiang created the Western Development Strategy, Hu broadly abandoned it, and Xi decided to rectify it with the BRI, this chain of
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policymaking consistently recognized the problems with western China and made efforts with varying degrees of success to address it. It also helps that there have been tangible promises for the BRI in the form of investments and infrastructure projects that make it difficult for the next generation of Chinese leadership to simply cut losses without dealing a great blow to Chinese soft power, unless new crises arise that damage the feasibility of the BRI, such as a “hard landing”. As such, even if the BRI is not kept in its entirety in its original form after the fifth-generation leadership steps down, it would not be a stretch to imagine major components of it being ported over into the policies of the next generation of Chinese leadership.
Lending from the points made in previous chapters, this thesis suggests three metrics of success for the BRI within the scope of the fifth-generation leadership, in descending order of importance:
1. Successfully contributing the transformation of the Chinese economy;
2. Successfully reversing the growing economic inequality between the inland and coastal regions of China;
3. Successfully generating returns from early investments within the BRI.
Although existing English-language literature does not promise that China will overcome its economic slowdown, it at least cautions against assuming that the economic problems are insurmountable, suggesting that China has a reasonably clear path forward and that a “hard landing” is unlikely (Parker, 2013). What should be of greater interest to
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observers of the BRI is when China will be able to achieve the economic reforms outlined in the Chinese Dream and the Four Comprehensives, especially relative to the progress of the BRI. Timing is everything. The three proposed metric of success obviously also come with their corresponding failure states, although it should be noted that none of these “failure states” demand the complete failure and abolishment of the BRI; rather, it simply increases the likelihood that the BRI will be amended in either scope or methodology, or perhaps be quietly abandoned and absorbed into a separate strategy proposed by future generations of leadership much in the way the Western Development Strategy was absorbed by the BRI.
The primary failure state of the BRI under the fifth-generation leadership would be the inability to carry out the necessary reforms required for the Chinese Dream, the first Centenary Goal, the economic components of the Four Comprehensives, and the
“Made in China 2025” strategy. These reforms would address China’s asset and credit bubbles, and thus pull China back from the precipice of a crisis similar to the Japanese asset bubble collapse of the 1990’s. The BRI plays an instrumental role in this strategy, as it is hoped that proximate developing markets in greater need of Chinese exports and with a lack of anti-dumping policies as found in the U.S. and Europe would provide a more immediate outlet of China’s industrial overcapacity. From a more stable and less dangerous position, China can then attempt to further its other ambitions. Conversely, the BRI’s inability to contribute to economic reform may exacerbate China’s dilemma and cause future generations of leadership to seek other options. While geopolitical imperatives make it unlikely for China to withdraw its existing involvement and
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investments, particularly along the Central Asia, South Asia, and Southeast Asia, the degree to which future generations of Chinese leadership will be willing to invest in such infrastructure projects may very well be sharply curtailed.
The secondary failure state would be the inability to address the growing inequality between inland and coastal China. When Hu shelved reform policies in favor of strengthening SOEs to stimulate pure economic growth, it was done so under the belief that said economic growth would be able to temporarily mitigate the negative effects of regional inequality and provide a larger margin of error for future reform (Brown, 2012).
This line of thinking has not necessarily changed with the fifth-generation leadership, but the circumstances are now certainly different; China’s economic slowdown no longer makes pure economic growth, especially when measured via GDP, viable, meaning reform is, to some extent, the only option left to the Xi administration. By using economic corridors to connect eastern China with Central Asia and Pakistan, two areas of Asia in great need of investment and regional integration, China hopes to maintain a sufficient level of economic activity in its poorer provinces so as to provide its leadership with the breathing room necessary to pursue further economic growth without being accused of sacrificing equality. Compared to the primary failure state, the second failure state is undesirable but tolerable and certainly nothing new, if the Western Development Strategy has been any indication. So long as the BRI contributes to economic reform, it will likely continue to exist, but new policies may be considered to directly address Chinese wealth inequality.
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The tertiary failure state would be the inability to generate returns on the early investments from the BRI, most likely from the China-Pakistan Economic Corridor, the China-Central Asia-West Asia Economic Corridor, and the China-Indochina Peninsula Economic Corridor. Relative to the other two failure states, non-performing BRI investments are more tolerable and, again, certainly nothing new, given the careless loaning practices of China’s state-owned banks. This can be seen in both domestic lending to inefficient SOEs and foreign lending, especially to debt-ridden Venezuela.
While regional connectivity has always been in the Chinese geopolitical interests, China’s credit situation suggests that the ability of Chinese investment targets to generate returns is less important than the Chinese economy’s capacity to absorb the monetary and credit risks associated with these BRI projects. Of course, these targets of investment will provide returns on investment, in spite of the structural challenges that face unorthodox investment targets like Kazakhstan or Pakistan. But if Chinese reforms take hold early enough to mitigate the worst consequences of non-performing loans, then it will still have been money well spent on regional connectivity for China’s future benefits. However, a worst-case scenario for the tertiary failure state would be for consequences to arise before the Chinese economy has achieved sufficient reform to absorb these costs.
Assuming that China can avoid the above failure states, or mitigate them to the point where they have greatly diminished consequences, what then? Ultimately, although issues pertaining to economic reform are most relevant to the fifth-generation leadership, should this be addressed in a timely matter, future generations of Chinese leadership will have more leeway, more room to maneuver, and more sustainable funding where the
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other aspects of the BRI’s strategic goals are concerned. There will be a greater diversification of emphasis. Although it is not certain which specific policies future generations of Chinese leadership will pursue, they are unlikely to diverge far from the other goals ultimately linked to Chinese geopolitical interests as the BRI ultimately provides a convenient springboard. Foremost is likely to be the diversification of Chinese energy security, which remains an outstanding issue that can threaten Chinese growth.
After that, strategic goals include the strengthening of the People’s Liberation Army Navy into a blue-water force capable of projecting Chinese power, an increased security presence in the Indian Ocean region and other areas at China’s periphery, more comprehensive trade relations with its immediate neighbors and markets as far as Europe, an increased involvement with international political and economic systems, and the consolidation of further Asian or even Eurasian institutions separate from Western or American political orbits.