Next step for China’s Belt and Road could be northern Australia (News)

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As with the Marshall Plan, Xi is making an expansive, risky bet on the future, hoping that the diverse nations to China’s west can be pulled into a new Sinocentric sphere of influence.

Like its US-led and funded antecedent, the initiative is a hydra-headed idea, combining strategic, industrial, economic and geo-political intent.

China wants to export not just its goods to continental Asia and beyond, but also its industrial expertise, manufacturing overcapacity, technological standards, and development philosophy.

Pakistan, long politically close to China, is being showered with infrastructure projects. Fast trains are heading south through Thailand and Vietnam. More than 100 freight trains a week head west from China all the way to Europe.

Much of this is trade and investment that might have been happening anyway, but it has been bundled under the Belt and Road Initiative umbrella in an exercise of geo-economic shock and awe.

Beijing is already locked in a contest with the US for control of the East and South China Seas, an area through which most of the country’s trade now passes.

With a string of allies, from South Korea and Japan in the north to Australia in the south, Imperial Washington still retains its title as the capital of “Maritime Asia” in the region, although it is hanging on by its fingertips in the face of a challenge from China.

Beijing aims to hedge the instability it faces off its east coast, where it is locked in territorial disputes with numerous countries, by creating a secure, prosperous and politically friendly string of nations to the west.

The Belt and Road Initiative is not without risks, something China’s technocratic elite have been increasingly pointing out in public in recent months.

With Xi’s personal imprimatur on the program, Chinese banks and state and private companies, and every province and city, have a political duty to fund investments in target countries.

But the country’s bureaucrats, mindful of the billion-dollar losses the Chinese have suffered overseas in recent years in such countries as Venezuela and Angola, have started to urge caution.

Li Ruogu, the former head of the Ex-Im Bank, one of the country’s biggest overseas lenders, warned that countries slated for big projects might not have the financial capacity to handle them.

“There are few countries with credit ratings above the BB level and the investment risks are relatively large,” he said. “Raising enough funds for the development of these countries is arduous.”

In one recent case, a Chinese state company gained control of a port in Sri Lanka after the local company couldn’t pay back the $US1.3 billion in loans used to build the facility.

The port was built seven years ago, before the formal launch of the Belt and Road Initiative. But the episode was an embarrassment for Beijing nonetheless, because it played into the most potent criticism of the initiative, that it was creating debt traps that would leave countries at China’s mercy.

Furthermore, China’s struggle to internationalise its currency, the renminbi, means that many of the projects will have to be funded in US dollars, something that runs counter to the initiative’s aims.

Like the Marshall Plan did for the US, China had wanted to use the billions of dollars of projects to elevate its currency, eventually giving it the global financial clout now wielded by the greenback.

A number of projects, such as the port in Sri Lanka, have been beset by allegations of graft, and a sense that Beijing is using the Belt and Road Initiative to capture elites, without much benefit to the broader population.

In a range of countries, governments, and NGOs, are pushing back against projects that fall under the initiative’s umbrella. In many places, such as Malaysia and Indonesia, the influence of the ethnic Chinese business class has long been a sensitive issue.

Whether these are just the teething problems of a new imperium, or fatal design flaws, is too early to tell. In the meantime, about 70 countries have signed on to the project.

Australia, so far, has remained aloof to the initiative’s attractions. In Canberra, however, a quiet rethink is under way. Don’t be surprised if Australia signs on, perhaps not to the whole program, but for a pilot initiative, to develop northern Australia.

For a government looking at ways to find ways to rebuild confidence in a stressed bilateral relationship, the Belt and Road Initiative might be the perfect vehicle.

Richard McGregor is a senior fellow for east Asia at the Lowy Institute in Sydney.