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Two of China’s Belt and Road projects reveal a flaw in the G-7′s new global financing plan

For some countries, megaprojects have political and infrastructure goals

Chinese President Xi Jinping, right, and Philippine President Rodrigo Duterte wave to the news media after a welcome ceremony in Manila in 2018. (Bullit Marquez/AP)

At their summit in Cornwall, England, President Biden urged fellow G-7 leaders to offer billions of dollars in aid to form an alternative to China’s Belt and Road Initiative. Since 2013, Beijing’s global infrastructure drive has poured Chinese money into energy, mining, port, railroad, telecommunications and other projects across the world.

Biden’s team, members of the former Trump administration and senators from both sides of the aisle have expressed concerns that Beijing uses the Belt and Road Initiative to serve China’s interests. As a U.S.-led effort, the new Build Back Better World plan announced earlier this month aims to mobilize private capital to address the infrastructure demands of low- and middle-income countries.

But do borrowing countries turn to Chinese financing because they lack global funding options, or because China wields its influence to pressure them? My research in the Philippines illustrates that’s not the full story — some leaders choose to work with Beijing because these projects give them greater control over the ventures.

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Here’s how I did my research

In my work, I studied Kaliwa Dam and the Chico River Pump Irrigation Project, two major Chinese projects in the Philippines. Between 2018 and 2020, I interviewed Chinese policy bank officials, Philippine government officials and representatives of nongovernment organizations. My research suggests that Philippine President Rodrigo Duterte moved forward with these projects because Chinese officials were open to expediting the work to ensure the projects would be completed during Duterte’s current term. These interviews also suggest Duterte planned to leverage both projects to reward local political leaders, maximizing his political clout ahead of the 2022 Philippine elections.

The Kaliwa Dam, a 60-meter-high dam spread over 113 hectares in two Philippine provinces, expands the presence of the Armed Forces of the Philippines (AFP) into the Sierra Madre mountain range. The dam enables the AFP to expand its bases and operations against the New People’s Army, the armed wing of the Communist Party of the Philippines. This means local politicians in Central Luzon and Calabarzon stand to benefit from bolstered security in their area against political opponents and the New People’s Army.

The Chico River project is located on a river with tributaries connecting Mountain, Kalinga and Cagayan provinces. The new pumping facilities are in Kalinga province, populated by the Indigenous Kalinga majority — but are designed to channel water to irrigate some 7,500 hectares of agricultural land in Cagayan province.

These interviews reveal that many believed Duterte relied on this project to directly reward Cagayan landowners who play an important role in national politics, with the added irrigation expected to boost fruit and coconut exports to the Chinese market.

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Why did Duterte choose Chinese partners?

One interesting puzzle is that the Japanese government was reportedly willing to fund both projects — yet Duterte instead sought Chinese assistance. Japanese lenders have long been the largest source of foreign aid in the Philippines. Japanese development agencies also have a half-century of experience working in the country, offer low interest rates and studiously follow global social and environmental standards.

But Duterte needed both projects to wrap up quickly and cement the legacy of his “Build! Build! Build!” infrastructure plan. Choosing Japanese partners to fund these projects might have incurred construction delays due to more stringent social and environmental requirements in Japanese-financed projects. Chinese interest rates, though higher than the Japanese financing rates on offer, were probably of less importance in the final decision, since much of the repayment burden would fall to Duterte’s successors.

The research also suggests that the Duterte administration may have disregarded Philippine social and environmental standards during the project implementation phase. The Chinese firms largely followed the Philippine government’s lead, ultimately contributing to the expropriation of Indigenous lands and the displacement of local communities. And increased militarization within the project areas discouraged opposition to the projects. Albeit indirectly and unintentionally, Chinese firms appear to have fueled efforts by Duterte’s regime to crush opposition social movements.

Why local politics play an outsize role in the Belt and Road Initiative

The story behind these two projects suggests that Duterte sought project partners who would be more amenable and less intrusive to his goals. It’s a pattern observed elsewhere: Indonesian President Jokowi Widodo reportedly opted to work with Chinese partners in the Jakarta-Bandung high-speed rail because they were willing to invest in a project that might not be profitable. In Malaysia, news reports suggest Prime Minister Najib Razak in 2016 sought Chinese loans to build the East Coast Railway as a way to bail out the 1Malaysia Development Berhad state fund.

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The lesson here is that leaders have political objectives in addition to development or geopolitical ones, influencing their calculus to work with Chinese partners. The Build Back Better World initiative, with its focus on transparency, good governance and climate-friendly projects, might not change a leader’s political reasons for choosing Chinese partners.

In essence, the new U.S.-led plan misunderstands the local drivers of interest in Chinese assistance. Some leaders do not necessarily solicit aid to benefit the institutions of their country — they may seek to use such aid for personal or political gain, including extending the scope of their political influence.

U.S.-led efforts to invest in infrastructure around the world might succeed at displacing foreign interest in China’s Belt and Road Initiative in one area — the marginalized communities and nongovernmental organizations that find themselves with little input on Belt and Road projects.

One area where Group of 7 soft power might find more traction is in projects designed to address poverty, climate change and the effects of the global pandemic. These projects would also do more to address the underlying grievances that have enabled populist autocrats like Duterte to gain such popularity.

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Alvin Camba (@alvincamba), an assistant professor at the Korbel School of International Studies at the University of Denver and a research fellow at the Climate Policy Lab at Tufts University, studies Chinese investments in Southeast Asia. This article draws on the author’s paper for the Carnegie Endowment for International Peace’s China Local/Global series.