Australia becomes a Chinese state

Is China's New Silk Road in a bind?

Even if it is only smaller projects of China's Belt and Road Initiative (BRI) in the state of Victoria that have now been stopped by the Australian central government - China's communist state and party leadership is raging and threatening with consequences.

The planned cooperation, especially in infrastructure projects, hardly went beyond declarations of intent. But the thrust of "increasing the participation of Chinese infrastructure companies in Victoria's infrastructure program" was enough for the Australian central government to end the flirtation of Daniel Andrews, the Prime Minister of Victoria, with the communist leadership in Beijing through federal law.

While the Chinese Embassy described the decision as "unreasonable and provocative," Australian Foreign Minister Marise Paine said the agreements were incompatible with Australian foreign policy. The previous agreements within the framework of the BRI are in any case not legally binding from an Australian point of view.

And so nothing will come of Beijing's plans to open branches of Chinese infrastructure companies in Victoria and to apply for contracts for large projects in the state. Nor will delegations from infrastructure companies from Victoria travel to China on a regular basis in the future in order to "better understand" opportunities for cooperation with Chinese partners - whatever that may mean. The cooperation in the fields of industrial production, biotechnology and agriculture that Beijing hoped for will also come to nothing.

Wake up call for the rest of the world?

Heribert Dieter from the Science and Politics Foundation (SWP) in Berlin believes that the removal from Canberra is not dramatic in terms of size. "First of all, this is a bilateral matter between Australia and the People's Republic of China. Australian-Chinese relations have been bad for two or three years and they are getting worse every month," the scientist stated in an interview with DW. "But it is an extremely difficult loss of face for China," emphasizes Dieter, who is intensively concerned with Chinese foreign policy under Xi Jinping. "The world has taken note of this, and it shows that there is increasing resistance to this in Western countries Belt and Road Initiative formed. "

China is not exactly with its back to the wall, says Dieter, but the prestige initiative of state and party leader Xi Jinping must expect even more headwinds in a number of countries in the future.

Damper for the New Silk Road

Due to the corona consequences, China's project of the New Silk Road has lost a lot of momentum. Particularly poor partner countries in Asia and Africa are facing serious economic difficulties.

"The pandemic is extremely inconvenient for China. Many countries are facing great economic difficulties. It starts with the main partner country Pakistan, which has repeatedly found itself in difficult waters," emphasizes Dieter. Other, even poorer BRI partner countries feel the same way. China must now consider how it, as a donor country, will deal with the new situation. "China would either have to extend the terms of loans or generally put projects on the back burner for the time being," believes the expert.

Opaque contract details

But that runs counter to the original trademark of the BRI, that "they didn't hesitate for a long time, but that announcements were implemented relatively quickly. And here it becomes clear that Beijing cannot reinvent the wheel either and that Beijing also has no all-weather cooperation, as Xi Jinping once said about the cooperation with Pakistan, invented it, but rather cultivates a fair-weather cooperation, "the SWP researcher points out.

Because little information is known about the fine print in the loan agreements between the BRI partner countries and the Chinese financiers, it is completely unclear what effects the economic crisis will have in the poor countries of Asia and Africa. Just recently, a group led by researchers from the Kiel Institute for the World Economy (IfW) and Georgetown University in the USA evaluated 100 BRI loan agreements and published them in a study entitled How China Lends. The core statements of the study confirm what critics of the BRI loan agreements have long been complaining about:

"First, the Chinese contracts contain unusual confidentiality clauses that prohibit borrowers from disclosing the terms or even the existence of the debt," the study authors summarize.

In addition, the Chinese lenders secured an advantage over other creditors by preventing BRI debts from being included in debt relief, so-called 'No Paris Club' clauses. In the Paris Club, state creditors meet debtor countries that are in financial difficulties.

"Third, cancellation, expediting and allowing

SWP expert Heribert Dieter: The headwind for Beijing is getting stronger

Stabilization clauses in the Chinese treaties give lenders the potential to influence the domestic and foreign policies of the debtors, "concludes the How China Lends-Study.

Montenegro as a warning example

Heribert Dieter calls these contractual clauses "scandalous" because they are not, as Beijing claims, private loan agreements that do not have to be disclosed. "Even if there are private actors in name on the Chinese side, they are state-sponsored actors."

But even more crucial for the recipient countries is the question: "Are these national debts, are these payment obligations that countries like Kenya or Pakistan have entered into? And it is downright adventurous that future generations are burdened with debts without these generations even being able to To take a look at the contract details ", criticizes Dieter.

However, he does not expect China to be willing to be more transparent. Unfortunately, it is a "bad trademark" in the Belt and Road Initiative opaque contracts are the standard. "In many cases we have already seen that there are contracts that were created through the use of corruption. Perhaps the most recent example is Montenegro, where an absurdly expensive motorway has been built and the previous governments of Montenegro have probably been corrupted . "

Through deserts, over mountains and the sea: planned BRI routing in the mountains

Fear of a chain reaction

Beijing has great respect for more countries like Australia to act and end cooperation with China's BRI. "It would hit the Chinese narrative seriously if one had to find out that not only Australia, which is comparatively small and small in terms of population, but also larger actors are different Belt and Road Initiative and thus bid farewell to the prospect of closer cooperation with the People's Republic of China. The likelihood that Australia is just a pioneer is relatively large, "affirmed SWP researcher Dieter.

Australia could play an early warning role like the canary in a coal mine and thus would have a kind of signaling function for the rest of the world. In the last few weeks and months the willingness to create alliances against China has grown significantly in the Indo-Pacific region, according to Dieter. "Perhaps the most prominent example is the military alliance between Australia, India, Japan and the USA. And it can be assumed that the headwind for China will also increase with a view to the Silk Road Initiative. And that is extremely unpleasant for Beijing."

Only Berlin is on the brakes

In Brussels, too, there are increasing signs that the EU is tightening its pace with China. Even earlier Beijing-friendly member countries like Italy are increasingly relying on closer ties between Europe and the USA, says the director of the MERICS China think tank in Berlin, Mikko Huotari. "The danger here is that the Federal Government will remain stuck in the last few meters of Merkel's Chancellorship on a course in China policy that does not recognize the new geostrategic basic constellations and fails to recognize that the wind has also turned in many other member states of Europe."

SWP expert Heribert Dieter shares these assessments: "The greatest obstacle to the development of a common China policy in the western industrialized countries is currently the federal government." In almost all capitals in Europe, in Washington and Tokyo, criticism of China has risen sharply, emphasizes Dieter. "Only Berlin is slowing down. Berlin also sent the wrong signal with the investment protection agreement that Chancellor Merkel was able to enforce at the end of 2020. A signal that aimed to intensify cooperation and not gradually reduce cooperation with China."