Roads to nowhere but the belt is Gucci: has China’s Belt and Road Initiative been successful so far and why?

Abstract

This article assesses the success of China’s Belt and Road Initiative (BRI) with respect to three objectives: strengthening China’s geopolitical stance, spurring geo-economic development in the Western regions and instilling a spatial fix to overaccumulation and thirdly, providing profit opportunities to troubled state-owned enterprises. I find that the BRI has only delivered on the third aspect, with even the BRI’s signature white elephant projects providing windfall incomes to the state-owned enterprises (SOEs) constructing and operating them. My explanation of this phenomenon is two-fold. Firstly, I argue that tense, coercive competition (Crotty, 1993) has spurred Chinese SOEs to revert to rent-seeking activity in order to stay afloat and realise managers’ cadre ambitions. As the state-owned Asset Supervision and Administrative Council (SASAC) evaluates manager performance based largely on company performance, demanding numbers that cannot be achieved under coercive competition in an environment of overcapacity, managers reverted to guanxi practices and corruption to secure under-the-counter deals, relying on soft budgets and beneficial lending practices. Amid tightening domestic regulation and Xi’s anti-corruption campaign, these strategies are becoming less viable and sustainable to pursue at home. As managers’ incentive structure has not evolved, pressure to seek rents persists, pushing SOEs to pursue their strategies abroad via the BRI. Secondly, the export of the strategies to persist amid coercive competition is enabled by a fragmented institutional environment, allowing SOEs to abuse asymmetries in information and outmanoeuvre stringent evaluation of their proposed BRI projects by mobilising political support through networks.