At a nationally televised press conference in Panama City in March 2019, a China-funded team of Chinese and Panamanian engineers took the stage. They unveiled the results of their feasibility study of the proposed high-speed Panama-Chiriquí Railway. They announced that the megaproject would cost $4.1 billion and take six years to build. Travel time from the capital to the Costa Rican border would be cut from eight hours to three.
Panama’s president Juan Carlos Varela was on hand to cut the blue ribbon, beaming alongside Wei Qiang, China’s fluent Spanish-speaking ambassador. Varela said new urban areas would be created along the route, helping to develop Panama’s neglected interior. He added that the train would increase the export competitiveness of Panama’s rural producers—noting that it is currently cheaper to send cargo to Panama’s ports from Shanghai than from its own coffee-growing Chiriquí Highlands. Panama would modernize its slow, fragmented land transport, and China Railway Design Corporation would get a juicy contract. Everyone agreed it was a win-win.
“Win-win projects” and “enhanced economic interconnectivity” are indeed the stated goals of China’s Belt and Road Initiative (BRI), also known as the New Silk Road. Introduced by President Xi Jinping in 2013, the BRI is China’s global economic strategy for the twenty-first century: to finance and build new infrastructure in partner countries around the world, linking them to China and Chinese-operated logistics hubs, and putting China at the center of global commerce.
On the other side of the world, metro billboards in Shenzhen advertised the upcoming Shenzhen Belt and Road International Music Festival. Wynton Marsalis and the Cleveland Orchestra would be performing, along with musicians from Turkey, Indonesia, Qatar, Taiwan, Italy, Poland, Slovenia, Vietnam, and dozens of other countries. “Silk Road Thoughts,” “Glory and Dreams,” and “Connecting China to the World” read the themes.
China’s leaders say they are not aiming to be a new colonial power; instead, they talk about using “soft skills.” In 2017—the same year the Chinese Communist Party (CCP) in Xinjiang province began rounding up millions of Uighur Muslims without trial and interning them in reeducation camps—Xi’s keynote address at the opening ceremony of the first Belt and Road Forum made several references to religion:
The ancient silk routes . . . connected the lands of Buddhism, Christianity and Islam and homes of people of different nationalities and races. These routes enabled people of various civilizations, religions and races to interact with and embrace each other with open mind. In the course of exchange, they fostered a spirit of mutual respect. . . . This part of history shows that civilization thrives with openness and nations prosper through exchange.
The Panama-Chiriquí Railway project was to be part of that exchange—and China’s first BRI project in the Americas. Panama became the first country in the region to join the BRI in November 2017. That was the year of what a local newspaper called a “honeymoon dance” between President Varela and Xi, when Varela cut Panama’s diplomatic relations with Taiwan to open them with China. That same year, a Chinese firm won a $165 million contract to build the Amador Cruise Terminal at the Pacific end of the Panama Canal. At the Atlantic end, another Chinese firm began construction of a $900 million liquid natural gas (LNG) power plant and the $1.1 billion Panama Colón Container Port, which will be the largest port in Panama. With hard hats and shovels, President Varela and Wei Qiang stood together at the ceremony to lay the port’s first stone, Varela noting that it was the biggest investment China had ever made in Panama. The deal also meant Chinese firms would soon control three of the six container ports on the Panama Canal, as Hong Kong–based Hutchinson Ports already manages the ports of Balboa and Cristóbal. China was on a roll in Panama.
As Chinese firms poured billions into real estate and infrastructure projects at both ends of the Panama Canal, many locals worried that Panama’s sovereignty was being threatened—a sovereignty only recently achieved, when Panama attained full control over the Canal Zone in 1999. In a 2018 editorial in La Estrella, Universidad Interamericana de Panama professor Euclid Tapia warned of the debt-trap diplomacy for which China has become infamous in many other BRI countries. Tapia cited Sri Lanka, “where to pay its debts to Chinese creditors the country was forced to lease its most important port for 99 years.” He said that similarly, and with little public attention, China was now seeking to construct a new fourth set of locks on the Panama Canal at an “unspeakable” cost of $15 to $20 billion—which “will gladly be financed by China,” precisely because Panama would likely be unable to pay it back. “Knowing the degree of corruption of our governments,” wrote Tapia, “it is highly probable that the fate of the Panama Canal will follow that of the Suez Canal, which due to Egyptian debt, England took from France. China could take over our canal and swallow us by osmosis.”
Perhaps slow to respond, Secretary of State Mike Pompeo flew to Panama City in October 2018 to discuss U.S. concerns with President Varela. Pompeo warned the president of the “predatory economic activity” of China’s state-owned enterprise (SOEs). “In parts of the world,” he told local news, “China has invested in ways that have left countries worse off, and that should never be the case. Any time there is investment that comes from outside of a country, it certainly should be a good investment for the investor, but it has to be something that’s good for the country that hosts that investment as well.” Through the media, Pompeo issued a warning to all of Latin America: “When China comes calling, it’s not always to the good of your citizens.”
Pompeo also broached another thorny topic: the four hectares at the Pacific entrance of the Panama Canal that Varela had offered China to build its new embassy. The idea of a giant Chinese flag waving before incoming ships at the mouth of the canal the United States built did not appeal to the Trump administration. The month after Pompeo’s visit, Panama announced that plans for the Chinese embassy by the canal entrance had been cancelled.
Despite Pompeo’s warnings, Varela and Xi danced on. In December 2018, two months after Pompeo flew out, Xi flew in, becoming the first Chinese president ever to visit Panama. During the twenty-four-hour visit, the countries signed nineteen cooperation agreements on trade and infrastructure. In a televised address, Varela recalled that Xi had once told him that China’s economy is an ocean, adding: “I want to complement those words by saying Panama connects two oceans, and [Xi’s] visit consolidates our country as China’s commercial arm and gateway to Latin America.” A day after Xi left the country, Varela announced that Chinese firms had won a $1.4 billion contract to build a fourth bridge over the Panama Canal.
China-Panama relations were growing closer than ever. By spring 2019, the Panama-Chiriquí Railway project was rolling ahead full steam. But it hit a snag: Varela was reaching the end of his term limit. Panama elected a new president from an opposing party, Laurentino Cortizo, who took office in July 2019. By now having awakened to the threat of Chinese influence in Panama, the United States wasted no time in putting pressure on Cortizo to rethink his country’s relationship with China. By September, Cortizo had scrapped the Panama-Chiriquí Railway project. In October, his administration announced an audit of Panama’s twenty-five-year contract with Hutchinson Ports, which ends in 2022. The Hong Kong firm has for decades been accused of not revealing its financial records and not paying the Panamanian government its 10 percent share of dividends from port operations.
Not losing a step, four months after leaving office, now ex-president Varela was again dining with Xi—this time in Shanghai at the China International Import Expo. But in December 2019, a bombshell dropped: Varelaleaks.com posted a phone chat between Panamanian officials indicating that Varela had received a $143 million bribe from China in June 2017—the moment he had switched Panama’s diplomatic relations from Taiwan to China. There were calls for an investigation, which remains stuck in Panama’s bureaucracy.
Belt and Road Hazards
The recent tug-of-war between U.S. and Chinese interests in Panama foreshadows many more conflicts to come throughout the Americas in the twenty-first century. In the past decade, three of the seven countries in the world to sever diplomatic relations with Taiwan have been in the Americas, as El Salvador and the Dominican Republic followed Panama’s lead in 2018. (Taiwan claims China offered the Dominican Republic $3.1 billion in loans and investments to change allegiances.) And since Panama signed on to the BRI, eighteen of thirty-three countries in Latin America have also joined the initiative.
China markets the BRI as a more expedient alternative to traditional development projects funded by international financial institutions (IFIs) such as the World Bank and the International Monetary Fund (IMF). In some ways, this is true. IFIs often make project funding contingent on countries’ consent to structural adjustment programs as well as the creation of jobs programs which allow local workers to actually do the work. China’s offers come free of such “good governance” requirements. Instead, China presents itself as a friendly banker-contractor making an offer at a low price—the “China Price”—to do the job, do it fast, and loan the money—no strings attached.
But China’s BRI deals do come with strings attached—albeit different sorts of strings from those of the IFIs. Among them, China’s debt-trap diplomacy and its penchant for targeting corrupt regimes and bribing officials have already been well-documented. In fact, local populations within fifty kilometers of a Chinese project in Africa showed significantly increased corruption, according to a 2016 Journal of Public Economics paper by Ann-Sofie Isaksson and Andreas Kotsadam. The study found that local corruption stays around long after Chinese projects end—while aid projects from other sources actually reduce corruption. But there are many other hazards along the New Silk Road which countries in the Americas should recognize.
The Digital Silk Road: Spying by Any Other Name
Cybersecurity firm FireEye reports that state-sponsored Chinese hackers frequently use BRI infrastructure projects for spying. FireEye even pinpointed China’s primary BRI cyber espionage group, APT40, also known as “TEMP.periscope” or “Leviathan.” Its typical targets include foreign leaders making BRI-related decisions, regional opponents of BRI projects, and government entities managing elections in BRI countries. Says FireEye:
We observed [Chinese spying] in more than 20 elections-related campaigns. . . . Examples include [targeting] the Australian Parliament in 2019, three months before the country’s general elections . . . [and] compromising Cambodia’s National Election Commission in mid-2018 . . . possibly looking to understand the impact of the election outcome on Belt and Road Initiative (BRI) plans.
BRI projects are making spying easy for China. Take the $200 million African Union headquarters building in Addis Ababa, Ethiopia, for example. China built it for free as a “gift” in 2012. In 2017, French newspaper Le Monde and other sources reported that China had hacked all the confidential data from the African Union’s IT network, recorded conversations throughout the building with microphones it had planted in the walls and furniture, and uploaded all this to Shanghai every night from 2012 to 2017.
China’s ambassador to the African Union, Kuang Weilin, called the Le Monde allegations “absurd.” After meeting with Chinese foreign minister Wang Yi, African Union chairman Moussa Faki agreed they were “all lies.” Except it happened again, last year, in the same building. According to a December 2020 Reuters report:
Acting on a tip from Japanese cyber researchers, the African Union’s technology staffers discovered that a group of suspected Chinese hackers had rigged a cluster of servers in the basement of an administrative annex to quietly siphon surveillance videos from across the [African Union’s] sprawling campus in Addis Ababa, Ethiopia’s capital. The security breach was carried out by a Chinese hacking group nicknamed “Bronze President,” according to a five-page internal memo reviewed by Reuters. It said the affected cameras covered “[African Union] offices, parking areas, corridors, and meeting rooms.”
Again, Chinese officials denied the report. African Union representatives were silent.
These cases foreshadow the future the Americas can expect with the BRI: Trojan horse projects yielding not only regular revelations of Chinese spying on their soil, but an ever-expanding circle of self-serving local elites—well paid by China—ready and willing to sweep allegations under the rug.
Chinese firm Huawei—the world’s largest telecommunications equipment manufacturer—provided the digital surveillance equipment used to spy on the African Union building. A 2019 Wall Street Journal investigation reported that Huawei technicians also helped leaders in Uganda and Zambia spy on their opponents. The United States, UK, Australia, New Zealand, Sweden, and Japan have banned Huawei 5G networks after U.S. officials accused the company of being able to secretly retrieve “sensitive and personal information” from the 4G networks it has built and maintained—in the United States and around the world—via technological “back doors” designed to be used only by law enforcement. Yet Huawei is already responsible for building up to 70 percent of the telecommunications infrastructure in Africa. It has installed networks in at least 186 African government buildings, including fourteen “sensitive intragovernmental networks,” according to Heritage Foundation analyst Joshua Meservey.
Huawei is also the tech leader in China’s revived vision of a “Health Silk Road,” in which Italy has shown a keen interest. The company is offering cloud storage for countries’ hospital and health databases, opening the door to mass infringements of privacy on patient records.
In China’s BRI neighbors in Central Asia, Huawei has built numerous surveillance systems. “By the end of 2020, Huawei . . . will have invested $1 billion in Uzbekistan’s digital infrastructure, in areas ranging from e-governance to facial recognition software,” observed Catherine Owen in “The Belt and Road Initiative’s Central Asian Contradictions.” “A similar Huawei surveillance system is already in operation in the Tajik capital of Dushanbe and in shopping centers in a number of cities in Kazakhstan.” The tools to extend China’s surveillance capabilities beyond its borders are now being put in place along the New Silk Road.
Throughout Latin America, Huawei is the leading contender to create new 5G networks. For example, it is now seeking to build a system of security cameras in the Colón Free Zone, Panama’s largest free-trade zone and home to over three thousand companies from around the world. This would be a potential vehicle for Chinese spying on thousands of commercial operations in Panama.
In short, every element of telecommunications infrastructure built under the BRI—the Digital Silk Road—could become a node in China’s cyber espionage network.
A Future as One of China’s “Somewhere Elses”
China today is in the early stages of attempting to transition from being the world’s factory to outsourcing and managing factories around the world. Put differently, Chinese production is shifting from made in China to made by China, somewhere else. Through BRI projects, China is creating a global network of Chinese-controlled somewhere elses, where it can manufacture, transport, and sell. These include Chinese-built, Chinese-operated industrial zones overseas, where Chinese-managed factories set up shop, overseeing local workers. They also include Chinese-built, Chinese-run overseas logistics hubs, including ports, rail stations, and airports. And they include Chinese-built, Chinese-managed overseas marketplaces including malls, shopping centers, and tax-free zones.
The explosion of China’s middle class, which has driven the domestic cost of labor up sharply, has prodded Chinese firms to outsource manufacturing. Many BRI projects create new industrial spaces to do just that. To illustrate, one need only look to the experience of Africa, where China is involved in infrastructure projects in some thirty-five countries.
Take Djibouti, where China built the $3.5 billion Djibouti International Free Trade Zone (diftz) in 2018—the largest free trade zone in Africa. It was soon filled with Chinese-managed factories employing local Djiboutian workers at rock-bottom wages. China also linked Djibouti to Ethiopia by constructing the Addis Ababa–Djibouti Railway—which will be operated by Chinese managers and drivers until at least 2023. Countries in the Americas should take note that—while not sold as such—a key purpose of the BRI is to repeat this pattern: creating Chinese-controlled manufacturing and logistics networks overseas and accessing cheap labor markets to which Chinese companies can outsource factory jobs.
Or take Transsion, maker of the most popular smartphones in Africa, selling under brand names such as Tecno and Itel. Transsion is a Chinese company, but it does not sell any phones in China and most Chinese people have never heard of it. It makes all of its African phones in factories in Ethiopia run by Chinese managers.
New BRI transport networks in Africa ship Transsion phones and thousands of other Chinese products flooding the continent’s markets. BRI projects in Kenya include the Port of Mombasa—the largest port in East Africa—the high-speed Mombasa-Nairobi Railway, the Thika Highway, and Two Rivers Mall, the largest in sub-Saharan Africa. Laying down thousands of kilometers of road and railways, China hopes to use Kenya as its primary gateway for commerce with 120 million people in East Africa. The plan is to funnel Chinese products through Kenya and on to Uganda, Rwanda, Burundi, the Democratic Republic of the Congo, northern Tanzania, and South Sudan. Within East Africa, Chinese products will be manufactured in Chinese-operated factories, transported across Chinese-built highways and railways, and sold in Chinese shops in Chinese-built malls, as they already are in Kenya.
China hopes to replicate this model in the Americas. It wants to make Panama one of its Kenyas in Latin America, a gateway to commerce with Central and South America. The Panama-Chiriquí Railway would have opened the door for Chinese firms to outsource factories throughout Panama’s undeveloped interior, buy up Panamanian farms, and ship the products and produce easily by rail to the ports it controls on the Panama Canal. To be sure, Panama sorely lacks manufacturing and high-tech industries—which is why it could be tempted into signing on to projects that would, in actuality, yield large numbers of manufacturing jobs. Like Kenya, Djibouti, Cambodia, Laos, and others, Panama would be well on its way to becoming one of China’s somewhere elses.
Part of China’s New World
Through the BRI, China unloads not only products but people. In recent decades, over one million Chinese, mostly men, have permanently moved to Africa, as documented by Howard French in China’s Second Continent. Another million Chinese are currently working in Africa indefinitely, with more to come. Most came to work on Chinese construction projects and decided to stay. In Africa, Chinese workers often find blue skies, clean air, and freedom from the CCP for the first time. Many Chinese men have found African wives—an important push factor in migration, as China has a gender imbalance of thirty-two million more men than women (due to the one-child policy and families’ preference for boys, which led to the abortion of millions of girls). Many Chinese job-hop from one African country to another, gaining skills and experience and taking advantage of the vast assortment of Chinese projects—and Africa’s lax border controls. The highest-grossing Chinese movie of all time, 2017’s Wolf Warrior 2, is about a Chinese ex-soldier making a new life in Africa.
Chinese emigration to BRI countries also helps reduce potential social unrest in China. BRI workers often come from poorer, more neglected provinces in China’s interior, where development lags far behind that of the coast and opportunities for advancement are much rarer. But in Africa, Chinese workers often find they can apply their skills, get promoted much faster, and make more money.
While Africa has been a new world for many Chinese, this sort of influx of millions of Chinese workers looking for a new life is the last thing the Americas need. The region is already plagued by illegal migration and broken borders—from the 1.8 million refugees escaping Venezuela’s economic meltdown, to the half million fleeing drug violence in Central America, to the nearly one million arrested along the U.S. border each year. Migrants fleeing conflict zones, disasters, and repressive regimes in countries around the world—such as Haiti, Cuba, and Syria—are currently spilling over Panama’s dangerous jungle border with Colombia, the Darien Gap, in the hope of continuing northward to seek refugee status in the United States. Yet many of these migrants end up staying in Panama, a small, poor country of four million people. The United States and the UN Refugee Agency have been working with the Panamanian government to manage this migrant overload, but it has not been easy. For example, with some two thousand migrants running out of money for food and water while stuck in a camp in Peñitas, Panama, on the Colombian border, some threatened to burn down the shelter they were staying in. Add a few million Chinese BRI workers wandering about the hemisphere and looking to stay around indefinitely to the Americas’ chaotic migration picture, and it’s a recipe for even more havoc.
Natural Resource Theft: The “Chinese Takeaway,” Dark Fleets, and Dead Bodies
China is the world leader in natural resource theft, and the BRI is only exacerbating this trend. For over a decade, Chinese illegal logging has been rampant in Africa—dubbed by locals “the Chinese takeaway.” China has stringent regulations on domestic logging, so it looks abroad to feed growing demand for luxury furniture among China’s middle class—and world demand for furniture made in China. Chinese agents pay Africans by the thousands to cut down trees for them—including in protected areas—and bribe African officials to get transport permits and sustainability certifications to allow the logs to be exported. China is now building an industrial wood processing park in Mozambique, where logs will be turned into chips, facilitating “log laundering.”
Chinese illegal logging is already rampant in the Americas, including timber from the Brazilian Amazon and rosewood from Mexico and Guatemala. Increased Chinese presence and control of ports, trains, and other transport linkages in the Americas will only intensify bribery and increase the speed at which the region’s forest resources are pillaged.
The same is true in the seas. China sates its immense appetite for seafood in part by being the world’s largest perpetrator of illegal, unreported, and unregulated fishing. The Americas have been a prime target. The United States (especially Alaska), Canada, Mexico, Colombia, Peru, Chile, Ecuador, and Argentina regularly intercept and detain Chinese fishing pirates in their protected coastal waters. These are known as their Exclusive Economic Zones (EEZs) under the UN Convention on the Law of the Sea (unclos). The Argentine coast guard has shot at and sunk Chinese vessels in the last several years, but this has not deterred pirates. “You can see five hundred Chinese vessels hovering within five hundred meters of Argentina’s EEZ every day during peak season, from February to April,” says Argentine environmental scientist Milko Schvartzman. “In the ocean, five hundred meters is nothing—it’s like stepping on the line. It’s a cat and mouse game. They have radar, and when they see no coast guard patrolling, they go in.”
In 2017, the Chinese ship Fu Yuan Yu Leng 999 made the mistake of trying to cross Galápagos National Park, a unesco World Heritage Site whose biodiversity inspired Darwin’s theory of evolution. The ship was intercepted by the Ecuadorian navy, which found 6,620 frozen endangered sharks on board, landing the Chinese crew a $5.9 million fine and up to four years in Ecuadorian jail.
But Chinese pirates have only grown bolder. In June 2020, Ecuador’s navy discovered 294 Chinese ships hovering just outside the Galápagos Marine Reserve. An Ecuadorian tuna boat captain said there were so many lights on the ocean surface that it looked like a city at night. Hawkeye 360 later discovered many of the ships had been “going dark”—turning off their mandatory GPS automatic identification systems (AIS) for long periods to avoid detection. “The Chinese don’t just turn off their GPS,” says Schvartzman. “They manipulate it. Often two vessels have the same ID, one with the AIS turned off. Some changed their name two or three times. Some in the Galápagos showed up on the Global Fishing Watch map as if they were sailing through the Amazon or the South Pole.” Using this map, conservation group Oceana discovered that Chinese “dark fleets” in the Galápagos had been “pillaging” squid, logging 73,000 hours of fishing in one month.
Like other pirate fishing fleets (e.g., Taiwanese, Thai, Vietnamese), Chinese vessels work together to camouflage illegal catches through transshipment at sea, which amounts to fish and squid laundering. Large refrigerated cargo ships called reefers wait just outside the EEZ, while smaller, less detectable jigger ships go in on poaching runs, then circle back to unload and hide their illegal catch by mixing it up with legal catches in the reefer.
Chinese distant-water fishing ships are rampant around the globe. In Ghana, Chinese firms have used shell companies to buy up 90 percent of the commercial fishing licenses, which are legally required to go to Ghanaians. For example, an SOE from Liaoning province, Dalian Mengxin Ocean Fisheries, turned out to be the ultimate owner of at least seventeen Ghanaian fishing ships, five in Sierra Leone, and one in Guinea, according to a 2019 investigation. In North Korea’s EEZ, dark fleets of some nine hundred Chinese ships poached over 164,000 metric tons of flying squid worth over $440 million during 2017 and 2018, according to a 2020 Science Advances study. “China’s great North Korean squid heist deprived some of the world’s most malnourished people of one of their few sources of protein,” wrote Christopher Pala in Foreign Policy.
China also ranks in the top tier of Walk Free’s Global Slavery Index for fishing slavery. Like pirates from other countries, many Chinese ship captains engage in human trafficking to obtain crew members, who are subjected to slavery and abuses. They come mostly from Africa and Southeast Asia. This was spotlighted in a 2020 BBC News story about three Indonesian crewmen who died aboard a Chinese-owned vessel after enduring “slave-like conditions.” Their bodies were tossed overboard, one caught on a cell phone video camera.
In fact, Chinese pirate ships have been depositing dead crew members regularly at the Port of Montevideo in Uruguay—South America’s pirate hub of choice, due to its lax inspection regulations. According to an official letter from Fernando Pérez Arana, prefect of the National Navy of Uruguay, foreign fishing vessels left fifty-three dead bodies—“about one per month”—at the Port of Montevideo between 2013 and April 2018. In the last few years, some 50 percent of such bodies came from Chinese ships. Some were left at the port in boxes, others tossed overboard and found floating in Montevideo Bay. Rather than crack down, Montevideo’s city government instead colluded with Chinese investors to buy land for a new Chinese port just downshore—without the congressional approvals required by the national constitution—before the scheme was exposed and halted by public outcry.
“Argentina is old in this game of protecting its EEZ,” says Schvartzman. “But countries like Ecuador and Peru, they are just getting in the game. They don’t have enough resources to protect their waters from China. And in Africa, it’s much worse. China subsidizes its distant-water fleets with free fuel, navigation equipment. . . . So South America should form a bloc and work as a team at international conventions to eliminate national fishing subsidies to industrial fleets, as is now being discussed by the WTO.”
No one yet knows the full extent of China’s illegal fishing, dark fleets, sea slavery, and dead crew members. But BRI port and rail projects, manned by Chinese personnel for years after completion—as they are currently in places like Djibouti and Pakistan—promise to facilitate more of all of the above.
South-South Cooperation Gone South
Part of the allure of the BRI is the promise of South-South cooperation: developing countries partnering with each other to exchange ideas, resources, and technology, reducing their dependency on wealthy countries for trade and aid. South-South cooperation promises a more equal footing in development relationships and the benefits of sharing approaches to similar challenges of development. The BRI would seem to be the grandest plan yet for South-South cooperation. Most countries that signed on are in the Global South, and “win-win” is supposedly the name of the game. But in a typical BRI project, Chinese banks loan the funds for Chinese companies to do a job overseas, using Chinese workers, tools, machines, and materials. Put differently, China loans other countries money to pay itself. A highway is built in Africa, but the money never leaves China. Thus, the BRI is not eliminating dependency but creating a new dependency, on a development model monopolized by China.
The CCP sells the BRI as a master plan orchestrated from Beijing. But in fact, its descriptions of the BRI have been intentionally vague, allowing it to be used—especially inside China—as propaganda for national unity and regime legitimacy. There is no one institution in charge of running the BRI. There are no specific criteria for determining what constitutes a BRI project. Essentially, the BRI is a brand name for a patchwork of disparate projects stitched together. Almost any project can be included. Some started in the 1990s or 2000s and have been rebranded as part of the BRI.
The image of a centrally managed BRI also belies the fragmented structure of the Chinese economy. Much of it—at home and on the New Silk Road—is driven by intense competition among provinces—and also among regions and cities. They compete on many fronts, such as GDP rankings, lowering taxes, foreign direct investment, green innovation—and securing BRI contracts. Says Catherine Owen:
Many BRI projects are a result of bottom-up lobbying by individual companies that approach provincial governments with project proposals. The specifics of this process are notoriously opaque. . . . Almost all [Chinese] provinces have developed their own BRI strategies and have looked for ways to internationalize their local economies. . . . For implementation, the three most important sets of organizations are China-owned or led financial institutions, state-owned enterprises, and provincial-level governments.
Thus BRI partner countries are often dealing not only with the national state capitalism of “China Inc.” but also the provincial state capitalism of a Fujian Inc., Hubei Inc., or Jiangsu Inc. China has thus far prioritized its SOEs for BRI contracts. Specifically, “As of October , Chinese SOEs contracted about half of BRI projects by number and more than 70% by project value,” reported Denghua Zhang and Jianwen Yin at the Interpreter. Financially, many SOEs are unprofitable firms which rely on government bailouts or bank loans to survive. The BRI is actually an extension of China’s “Go Out” policy, started in 1999 under Jiang Zemin, which was designed largely to give “zombie” SOEs new life. Having hosted inward foreign direct investment (mostly foreign-owned factories) since 1978, with the Go Out policy China encouraged SOEs to launch overseas projects—outbound foreign direct investment. The BRI has propelled SOEs further out and, in some cases, supercharged their business. “Since their financial security is often guaranteed by the government,” says Owen, “[SOEs] are able to engage in riskier projects, and are often accused by Western interests of violating World Trade Organization (WTO) limits on state aid. However, they are by no means fully under the control of Beijing.”
Some Chinese SOEs are world-class, like dam builder Sinohydro and China State Construction Engineering, the world’s largest construction company by revenue. But many others are inept. Take BRI oil projects in Kyrgyzstan, China’s neighbor, for example. The failed Shanmei oil refinery project by Shaanxi Coal and Chemical Industry, a zombie SOE, began in 2009 and today is operating at 25 percent capacity. China Petrol Company Junda, Ltd., which manages the Junda refinery, has been cited by the Kyrgyz government for tax evasion, illegally pumping hydrocarbons in the atmosphere, price gouging, and violations of land use and historic preservation codes. Besides emitting “stinking sulfurous fumes,” the company ignored state inspectors’ instructions to install a fence, leading to the destruction of national historic burial grounds dating from the fifth century BC. Countries should be aware of the huge variance in quality and outcomes among BRI projects done by SOEs.
Increasingly, however, China is aiming for provinces and SOEs to share the New Silk Road with “national champions”—like Huawei, Tencent, and ZTE. China also plans to use BRI markets to further its long-term strategy of cultivating new world-class multinational corporations. And Beijing has for years been saying it is in the process of shutting down all of its thousands of zombie SOEs.
SOEs have helped pave the New Silk Road, in many ways, by dominating its smaller markets. But this success has not always translated to larger markets, according to a 2017 report from Silk Road Associates and Baker McKenzie. In the top ten BRI markets—India, Russia, Indonesia, Korea, Turkey, Saudi Arabia, Thailand, Taiwan, and Poland—the report found that “Chinese SOEs have generally found it tougher to compete . . . [since] Korean and Japanese or American and European firms are entrenched and the playing field is more level.” The report goes on to warn that Chinese firms may increasingly buy up European or U.S. firms to improve their brand and be more competitive in those markets.
Meanwhile, European contractors have only received “crumbs from the table” on BRI projects in Europe, while the lion’s share of the work has gone to China’s SOEs, according to a 2020 report from the EU Chamber of Commerce in China.
In short, as China’s SOEs and national champions ride the New Silk Road to the Americas, BRI partner countries can expect minimal participation in projects in their own countries—crumbs from the table—and perhaps Chinese buyouts of some of their own companies.
Tofu-Dreg Time Bombs
Unloading excess products is a key benefit of the BRI for China. Building malls, ports, and railways involves immense quantities of steel, cement, glass, pipes, wires, saws, bulldozers, dump trucks, and other products—all massively overproduced by SOEs. At home, China (artificially) expands markets for these products by (unnecessarily) tearing down and rebuilding buildings every twenty to thirty years, making construction its top industry. This (artificially) drives up GDP and helps stave off unemployment (while destroying tens of thousands of demolition workers’ lungs from inhalation of silicon dust without adequate protection). BRI projects provide new opportunities overseas for Chinese construction firms running out of opportunities in China, while unloading China’s overproduced construction materials all over the world.
The quality of Chinese construction, however, does not always match its quantity. In China, construction is famously often rushed and uses cheap materials and/or unqualified workers, leading to many shoddy buildings—including outright disasters, such as collapsed bridges and skyscrapers. These have earned the nickname doufuzha gongcheng or “tofu-dreg projects”—worse than the leftover dregs from making tofu. Examples include the flimsy schools that fell like a house of cards during the 2008 Sichuan earthquake, killing over five thousand students; the quarantine hotel in Quanzhou that crumbled in 2020, killing ten; and the 2020 Facebook viral video of mushy railing pillars of a Chongqing bridge that could easily be destroyed with one’s bare hands.
Time will tell how much tofu-dreg construction China is spreading along the New Silk Road, but already, there have been disasters. The $12 million Chinese-built Sigiri Bridge in Western Kenya collapsed in 2017—two weeks after President Uhuru Kenyatta inspected it—injuring seventeen workers. In 2019, twenty-eight construction workers were killed when an unfinished, unlicensed seven-story condominium funded by Chinese investors collapsed in Cambodia’s Sihanoukville Special Economic Zone—which China calls a “pillar” of the BRI.
Tofu-dreg construction persists because many Chinese construction companies cut corners, rush jobs, ignore safety standards, and use poorly trained workers to save costs and meet deadlines. Inside China, companies get away with this by bribing officials and stifling popular protest. This will not always work so well outside China, where democratic governments are under greater popular pressure—and tribal politics can get violent in a hurry. This has already started. Since 2011, Chinese workers and businessmen have been kidnapped in over a dozen countries. Chinese workers have been killed by locals in Bangladesh, Pakistan, Laos, Kenya, South Sudan, and the Democratic Republic of Congo, among other countries. In 2019, Baloch separatists in Pakistan shot four people in a Chinese hotel overlooking Gwadar Port—the end of the China-Pakistan Economic Corridor, China’s most important BRI project. “Balochistan will be a graveyard for your expansionist motives,” the Balochs told China in a video. The pervasiveness of tofu-dreg construction inside China has been called a “ticking time-bomb.” On the New Silk Road, it could be the same.
Wishful thinking might suggest that BRI projects in foreign countries, under foreign laws and scrutinized by foreign media, will hold Chinese construction firms more accountable. Indeed, bad publicity over debt-trap diplomacy has led many governments to rethink their participation in the BRI. But in 2018, China established the China International Commercial Court (CICC), dedicated to adjudicating BRI issues. As Aarshi Tirkey of the Observer Research Foundation points out, the CICC differs from typical international commercial courts (ICCs) in that it has zero international judges (all are Chinese) and its working language is Mandarin, not English. By contrast, the ICCs in Dubai, Qatar, and Singapore have five, ten, and sixteen international judges respectively, and all use English as a working language. In short, South-South cooperation with Chinese characteristics means not “equal footing” but international disputes settled in Chinese courts, by Chinese judges, in Mandarin.
Carving Out Spheres through Standards
The one-way nature of the BRI can also be seen on the rails. Now that BRI-built railways span Central Asia, the longest train route in the world connects Yiwu, China, to Madrid. As Andreea Brinza noted in Foreign Policy, however, “containers on the new routes come to Europe full of low-tech Chinese products—but they leave empty, as there’s little worth transporting by rail that Chinese consumers want.”
BRI rail projects use Chinese rather than Western railway technology standards. This is a key component of the new “China Standards 2035” plan, which outlines a vision for China to set global standards in technology by 2035 (by which year China also hopes to double its current GDP). As Peter Cai of the Lowy Institute writes:
One of the least understood aspects of [the BRI] is Beijing’s desire to use this initiative to export China’s technological and engineering standards. [This] must be understood in terms of its broader ambition to become an innovation-based economy and a leader in research and development. . . . There is a popular saying in China that “Third-tier companies make products, second-tier companies make technology, and first-tier companies make standards.” There is a pervasive belief within China, particularly in policy circles and academia, that only companies that make standards can be considered world-class companies.
Besides rail standards, the CCP also hopes to export Chinese standards—present and future—in petroleum, 5G, cloud computing, artificial intelligence, and the Internet of Things. A 2021 Council on Foreign Relations report warns that the BRI could thus “enable China to lock countries into Chinese ecosystems by pressing its technology and preferred technical standards on BRI recipients.” In 2019, China reported that it had signed forty-nine cooperation agreements on standards with eighty-nine countries and regions along the BRI. As China tries to rewrite the rulebook of global technology standards, countries will increasingly be forced to line up on either side of a Chinese-Western tech divide. Through trade and brute force, foreign imperial powers once imposed spheres of influence on the map of China; China may impose new spheres of influence around the globe by setting technology standards.
Land and Resource Grabs: “The Chinese Are Coming for Everything”
As China unloads products and people out over the New Silk Road, it also uses it to load up on natural resources and agricultural products to meet the demands of its enormous population. For example, China has built new ports in a dozen countries in Africa, where it has been by far the largest extractor of the continent’s natural resources—such as oil from Angola, timber from Gabon, iron from Guinea, and cobalt from the Democratic Republic of Congo. In the Australian state of Victoria, Chinese firms bought the Port of Melbourne—the country’s busiest port—in 2016 for $9.7 billion. China also bought northern Australia’s Port of Darwin in 2015. In addition, China now owns 2.3 percent of Australia’s land, especially dairies, wineries, and cattle, sheep, and barley farms. China uses its new overseas ports to connect its rapidly expanding “land grab” farms to China, where raw materials are processed.
Take wool, for example. Chinese wool tycoon Qingnan Wen has managed to become the largest importer and one of the largest exporters of Australian wool today. As founder and president of Tianyu Wool, China’s largest wool maker, Wen said in 2017 that he wanted to create a “wool bridge” between Australia and China. He did exactly that. In Victoria, Wen has bought up sheep farms worth hundreds of millions of dollars over the past five years. The wool ships out from the now Chinese-owned Port of Victoria to Tianyu’s huge wool processing plant outside Shanghai.
Australia had its time on the exploited end of colonial wool mercantilism: by 1849, it was the British Empire’s largest source of wool. Now, Australians are questioning China’s new mercantilism—and their increasing dependency on it. The events of 2020 turned up the volume on Australia’s national debate over the “China question.” After exporting Covid-19, China added insult to injury by slapping heavy bans and tariff hikes on Australia’s exports, in response to its request that world leaders investigate the origins of the virus. While in 2018 Victoria became the only Australian state to sign on to the BRI, in April, Australia’s federal government overrode the state and cancelled the deal. “I consider [Victoria’s BRI agreements] to be inconsistent with Australia’s foreign policy or adverse to our foreign relations,” stated Minister of Foreign Affairs Marise Payne. Said Australian member of parliament Ted O’Brien on SkyNews:
No longer is this a matter of high politics—it’s involving mainstream Australia. I personally believe that resolving the China question is probably the biggest challenge of our generation. . . . It’s a matter of the People’s Republic of China trying to pit the Australian community against each other, the business community against government. When you see business leaders—in response to the punitive measures introduced by China—step up to the microphone, go on television, go to newspapers, and try to give gratuitous advice to the government, every time that happens, China smiles. They want the business community to put undue pressure on the political community in Australia, in the hope that we would fold. We need to have very clear eyes on that. The Australian business community needs to have a better understanding when it comes to what China is trying to achieve.
In the Americas also, China is one of the top “land grabbers,” along with South Korea and Saudi Arabia. Chinese firm WH Group purchased America’s largest pork producer, Smithfield Foods, in 2013 for $4.7 billion—helping to multiply Chinese ownership of U.S. farmland tenfold in less than a decade to some two hundred thousand acres. China owns vast swathes of South American soy giants Brazil and Argentina, as well as rice farms in Cuba and Mexico.
Like millions in Australia, Africa, and Asia, citizens of the Americas are now debating their own China questions. Take Argentina, for example. After an epidemic of swine fever in China, Beijing has a $3.8 billion offer on the table for Argentina to create twenty-five enormous new pig farms—each with some twelve thousand pigs. The deal would increase Argentina’s pork production by up to fourteen times, turning it into one of China’s main pork suppliers. The plan has sparked public protests in Buenos Aires, an open letter in opposition by over one hundred Argentine intellectuals, artists, and journalists, and a petition signed by over five hundred thousand Argentines, entitled “We do not want to transform ourselves into a pig factory for China, nor into a factory for new pandemics.”
China’s land grabs help support its ongoing dietary transition, which is driven by increasing affluence. UCLA historian Philip Huang found that, in recent decades, China’s diet has shifted from an historical 8:1:1 ratio of grains to meat to vegetables to 4:3:3 today. At the same time, however, 40 percent of China’s own farmland has been degraded by overuse, erosion, and pollution, forcing it to look for new farmland overseas. The Panama-Chiriquí Railway project would have facilitated Chinese land grabs around Panama’s hinterlands—and potentially in neighboring Costa Rica and Colombia—by creating a rapid connection to ports already controlled by China.
Along a remote stretch of western Argentina’s National Route 40, near the base of the Andes mountains, lies one of China’s more unusual land grabs. Espacio Lejano Station covers 494 acres and is run by the Chinese National Space Administration as part of the China Deep Space Network. Nominally a radio station, it is widely suspected of being used for military and intelligence purposes. “Nobody knows what they do there,” says Schvartzman. “But in general, in Argentina the common people on the street are very aware of what China is doing. We have a saying, ‘Los Chinos vienen por todo’—the Chinese are coming for everything.”
In the last decade, Western governments have been withdrawing from a “No Go World,” as Ruben Andersson puts it. Meanwhile, China has been going out. “We should build the Belt and Road into a road of opening up,” said Xi Jinping. “Opening up brings progress, while isolation results in backwardness. For a country, opening up is like the struggle of a chrysalis breaking free from its cocoon. There will be short‑term pains, but such pains will create a new life.”
As China opens out along the New Silk Road, how will it protect its new interests overseas—and its citizens, when they are attacked and kidnapped? How will it avoid wars? Having established its first overseas military base in Djibouti, will it seek to build one in the Americas? As China antagonizes its neighbors with gray zone activities—violating Taiwan’s airspace, building fake islands in the South China Sea—will it do the same in the Americas? BRI infrastructure projects like train stations and ports create myriad soft targets; will these be attacked in protest against China? Will the Americas reject the Digital Silk Road as the record of spying incidents continues to pile up? Will countries decide that their privacy and territorial sovereignty is worth more than telecom, land, and construction deals?
Chinese influence in Panama has special importance for the United States today, for several reasons. Built in 1914 under Teddy Roosevelt, the Panama Canal is a signature U.S. megaproject, a symbol of its hegemony in the Americas. The Panama Canal Zone was a U.S. territory from 1903 to 1979, similar to Puerto Rico, Guam, and the U.S. Virgin Islands. U.S. public schools operated there, and “Zonians” received U.S. mail addressed with the state postal abbreviation CZ. Heavy and growing Chinese influence in Panama today challenges the historic U.S. cultural dominance of the “Crossroads of the Americas.”
China’s control of Panama’s ports, in particular, is a threat to future U.S. trade security. Today, 63 percent of the cargo passing through the canal is headed to or from the United States. China is currently ignoring unclos in the South China Sea, the autonomy of the Xinjiang Uighur Autonomous Region, and its treaty with Britain on the governance of Hong Kong. So it is not hard to imagine that China could ignore its canal operation agreements and use its control of three Panama Canal ports to interfere with U.S. trade in a time of war or other conflict. Further, China has for years tried to build new alternatives to the Panama Canal. These include plans for a canal through Nicaragua (a potential ecological disaster) as well as “dry canals” across Costa Rica and Colombia, connecting the Atlantic and Pacific oceans by rail. If any of these new canals materialize, China could use its BRI partnerships to redirect shipping away from Panama to Chinese-built canals.
In the Americas, China sees opportunity. BRI projects provide profits for Chinese companies; jobs for millions of Chinese workers; markets to unload overproduced materials; connections to farmland and natural resources; industrial zones where Chinese factories can set up shop; transport infrastructure which China can man for years to control global shipping; soft power connections to influence foreign countries; and new footholds from which China can engage in gray zone activities.
And in the BRI, countries in the Americas see opportunity. Argentina is the eighth-largest country in the world, yet it has no viable train system. In 2018, it signed a $1 billion deal with China Railway Construction Corporation to modernize its cargo rail by 2025. Mexico has the thirteenth-longest coastline in the world, but its aging ports use outdated technology. So it hired China Harbour Engineering Company to build a new $1.5 billion terminal at the Port of Veracruz—now the second-largest port in Mexico. Colombia, a strong U.S. ally, has had the least Chinese investment of the major countries in the Americas. But in 2019, the city of Bogotá signed a $4 billion deal for China Harbour Engineering to build a new metro system—and operate it for twenty years.
And Panama? Panama’s canal has made it one of the world’s most globally connected countries. Yet its internal connectivity lags far behind. As a result, Panama suffers from sharp regional inequalities. The average per capita GDP of the three provinces surrounding the canal is four times that of the seven outlying provinces. China promised to help change that with the Panama-Chiriquí Railway project and future investments, which aimed at achieving more integrated development throughout the country—something the United States did not do in the seventy-six years of the Canal Zone era. While the Chinese train project fell through, Panama is still looking for options—and China will present more offers. “We don’t offer constricting belts or a one-way road,” said U.S. vice president Mike Pence. But without alternatives, warnings are not enough.
In Engineering News-Record’s 2019 ranking of the top 250 global construction contractors, the top five were Chinese, and the only U.S. firm in the top twenty was Bechtel, at seventeen. Why? Unlike its competitors, the U.S. government has not made tapping the global infrastructure development market a core priority. Unlike other governments, it lacks close relationships with its own contractors, and it has not led the way overseas with the high levels of diplomatic support that have allowed contractors from countries such as China, Turkey, and Spain to form partnerships with foreign construction and engineering companies. The U.S. government has not offered financing packages that are competitive with, for example, the Export‑Import Bank of China, which provides more export financing than the export credit agencies of all of the G7 countries combined. Further, according to former assistant secretary of state Jose W. Fernandez, U.S. contractors tend to be local and focus on specific tasks within infrastructure projects, whereas Chinese and European contractors are accustomed to bidding at the national and continental scales and managing all aspects of projects from start to finish—the “turnkey” approach that developing countries are looking for. U.S. firms also see overseas infrastructure projects as riskier. They often assume they cannot win bids, due to factors such as bribery, favoritism toward local companies, and the tendency for developing countries to select the project with the lowest cost bid—to avoid the appearance of corruption—rather than the lowest life-cycle cost. As a result of these challenges, many U.S. firms have given up on the global infrastructure market. “There’s an infrastructure boom going on around the world,” said Fernandez in a 2013 address at Dartmouth. “The emerging markets are not going to sit around forever and wait for American companies to come. The infrastructure train is going to leave the station, whether we’re there or not. Now is the time.”
The U.S. government has taken some measures toward competing with the New Silk Road. The Blue Dot Network, announced in 2019, is an initiative by the United States, Japan, and Australia to promote quality infrastructure projects. It will help countries assess projects and certify that they are “inclusive, transparent, economically viable, financially, environmentally and socially sustainable, and compliant with international standards, laws, and regulations”—all traits that many BRI projects have lacked. The 2019 Better Utilization of Investments Leading to Development Act (build Act) merged several lending institutions and many functions into a new development bank, the U.S. International Development Finance Corporation (DFC). A response to China’s BRI, one of the build Act’s stated aims is “to provide countries a robust alternative to state-directed investments by authoritarian governments and United States strategic competitors using high standards of transparency and environmental and social safeguards, and which take into account the debt sustainability of partner countries.” The act gave the DFC new financial tools to support investors, more than doubled the lending capacity of its predecessors to $60 billion, and extended investment authorization periods from one year to seven. These changes will make it easier for U.S. companies to get financing for overseas projects. Additionally, in 2016, President Obama launched initiatives such as u.s.-asean Connect and Power Africa, which have had some success in connecting U.S. contractors with opportunities overseas. But in the big picture, initiatives like these are small first steps toward remedying America’s lack of competitiveness. The U.S. government must make overseas infrastructure development a top priority and do much more diplomatically to cultivate relationships between U.S. contractors and foreign governments. As Ziad Haider of the Center for Strategic and International Studies points out, the U.S. needs to place its advisers in key ministries overseas, as competitors do, to train foreign decision makers in the benefits of good contracting practices—and disrupt China’s narrative by pointing out the risks of BRI projects. Haider notes that the U.S. can also do more domestically to promote coordination among contractors, including helping to establish U.S. consortia that can offer the turnkey infrastructure solutions that are essential to compete with the BRI. The opportunities in the global infrastructure market are immense. But in many countries of the Americas and the world, while the U.S. sleeps, the New Silk Road is the only game in town.
“We need, and we have asked,” said Panama’s President Cortizo, “that [the United States] look toward the region more—the region, not just Panama. They need to pay more attention. While they’re not paying attention, another one is making advances.”