BRI investment in Asia: nature of different approaches by subregion

BRI investment in Asia: Nature of the different subregions’ approaches


09 | 03 | 2023


Most countries try to balance their alliances between China and the US to minimize risks and maximize benefits

In the image

Simplified map of the ‘belts and roads’ that make up the Chinese initiative [United Nations]


The Belt and Road Initiative (BRI), sometimes referred to as the “New Silk Road” or the “One Belt, One Road” Initiative is a global investment and infrastructure development project led by China. Launched in 2013 by President Xi Jinping during a state visit to Kazakhstan, BRI aims to model the original Silk Road which connected mainland imperial China to ancient Europe through a network of land-based trade routes. The Silk Road was the first glimpse at primitive globalization, connecting eastern and western societies through commerce; stimulating cultural connectivity and promoting economic prosperity.

Xi Jinping's “New Silk Road” is projected to include a Maritime Silk Road, a Digital Silk Road, a Polar Silk Road and, to date, six economic corridors: the New Eurasian Land Bridge, China-Central Asia-West Asia Corridor, the China-Pakistan Economic Corridor, the Bangladesh-China-Myanmar Corridor, the  China-Mongolia-Russia Corridor, and the China-Indochina Peninsula Corridor. As of today, over 150 countries have signed Memorandums of Understanding with the Chinese government to join Belt and Road.

Officially, China aims to encourage economic cooperation and connectivity between Asia, Europe, Africa and Latin America. Its main objective is to enhance global trade linkages, upgrade already existing markets in underdeveloped regions, improve basic living standards and establish itself as the administrator of world supply chains. Unofficially, it is speculated that BRI also has a hidden political agenda. In 2017, Indian geostrategist Brahma Chellaney devised the “Debt Trap Diplomacy” concept which stated that China is fulfilling its political ambitions by granting massive loans to underdeveloped countries (disguised as BRI investment lending) and then leasing or acquiring their assets when they fail to repay the loan in full. As a result, some international analysts argue that China is using BRI as a “trojan horse” to expand its sphere of influence and cement itself as a hegemonic global power.

The problem with this conclusion lies in the fact that most countries hedge between the US and China. Hedging is the practice by which small and oftentimes underdeveloped states balance their alliances between two great powers to “minimize risks and maximize benefits.” It grants smaller states a “fail-safe” in case one of the two powers becomes unreliable. For this particular case, BRI investment trends throughout the Asian continent (composed of Southeast Asia, East Asia, Central Asia and South Asia) between 2013 and 2022 will be used to analyze the influence that hedging has on the development of Belt and Road over the short and long term.

The objective of this paper is to analyze whether the Belt and Road Initiative is a way for China to achieve a larger political objective. And if so, what is it that it is trying to achieve? What challenges does hedging pose to the said objective? And why is it pushing such an agenda forward? This paper seeks to examine these questions through case studies of subregions within the Asian continent.

Largest investment: Southeast Asia

China is located in a strategic geographic position at the center of the Asian continent. It's reasonable to assume that it would prioritize engagement in a region that is geographically closer and culturally linked to it before venturing outwards. This is evidenced by the fact that in its totality the Asian continent witnessed the highest amounts of investment lending and infrastructure development of the entire project since 2013 (with a notable exception in 2016-2018 and 2022, which witnessed higher amounts of engagement in the Middle East).

Southeast Asia is composed of Myanmar, Thailand, Laos, Vietnam, Cambodia, Malaysia, Brunei, Indonesia, Singapore and the Philippines. Mainland China shares an indisputable cultural connection to Southeast Asia as a result of massive migration movements towards Cambodia, Thailand, Malaysia, Indonesia and Singapore throughout the 19th and 20th centuries. Such collective consciousness between the Chinese and Southeast Asians opens the floor for safe and predictable investment trends which is highly attractive to Chinese companies willing to contribute to the expansion of BRI while still remaining risk averse. It becomes clear that Southeast Asia will become a focal point for investment and infrastructure development given that it provides both the Chinese government and private investors with safer and more reliable supply chains than do other regions struck by poverty and instability such as Africa and Latin America. At the same time, the geographic location of Southeast Asia both right at China's backyard and at the shores of the South China Sea makes the region incredibly appealing to private investors looking for easily controlled supply chains and access to China's most important trade route.

Together, the ten Southeast Asian countries make up the ASEAN organization. For the past couple of years, the focal point of China-ASEAN relations has been the escalating tensions due to territorial and maritime disputes in the South China Sea. ASEAN, which is an enduring partner of the US, openly rejects China's “nine-dash” line which China claims grants its sovereignty over the majority of the sea, and by extension its resources, as a historical right. China, for its part, utilizes its political, economic and military superiority to coerce the ASEAN states into submission. Nearly 60% of Chinese maritime trade flows through the South China Sea to the Strait of Malacca towards the Indian Ocean.

Increasing tensions in the region with the ASEAN states as well as the US has left both the Chinese government and Chinese private investors looking for alternative ways of advancing their interests. It's through BRI that China has been able to insert itself in Southeast Asian politics, economics and civil society. Racked by instability, poverty and corruption the short-term loans provided by Belt and Road are incredibly alluring to the ASEAN states. And such loans become even more enticing when they come with the promise of infrastructure development, employment opportunities and delayed repayments. As such, many Southeast Asian countries have accepted Chinese investment in the short term without considering their long-term implications. Belt and Road investment and development in Southeast Asia will be aimed at mitigating tensions in the South China Sea and further entrenching Chinese politics and economics with the ASEAN states to protect Chinese national interests. These interests include the free and undisturbed passage of Chinese maritime trade, the recognition of the “nine-dash line” as a legitimate historical claim, and the establishment of a solidified Chinese sphere of influence over the region to counter the presence of the US.

Nevertheless, ASEAN maintains a stable and enduring relationship with the US to counter China's political influence in the South China Sea. Militarily speaking, ASEAN is no match for the Chinese navy, and thus, these countries must rely on US presence in the region to defend their claims over the sea and protect their national interests. So while the ASEAN states veer towards China for economic relief they also rely on the US for security protection. In this sense, Southeast Asia is the perfect example of hedging in practice and how China is using Belt and Road sponsored investment as an attempt to fully incorporate Southeast Asia into their sphere of influence.

Given China's clear and strict policy of non-interference in the affairs of other states (a policy that sets it apart from the US) it will use BRI sponsored investment and infrastructure development to mask its true intentions; which are to expand its influence over Southeast Asia at the expense of other countries' autonomy and sovereignty to favor its stake over the South China Sea. Such is the case of Indonesia, where China has been increasingly investing and politically engaging in the past year. Recently, aside from becoming Indonesia's largest trading partner, China has also sped up construction on the Jakarta-Bandung High-Speed Railway (a crucial project within the original Belt and Road blueprint) and settled total investment for it at $1.2 billion. Additionally, in February of 2023, Chinese Foreign Minister Qin Gang visited Indonesia, where he met with President Joko Widolo to discuss the future of Indonesia-China relations which include: modernization through cooperation, economic integration and regional stability. Gang's visit to Indonesia and Beijing's urgency to finish construction on the Jakarta-Bandung High-Speed Railway both come at a time in which Beijing desperately needs Indonesia's support and its influence as Chairman of ASEAN for 2023 to combat increased US presence in the region. Ultimately, China will continue to engage both economically and politically with Indonesia throughout 2023 to fully integrate it, and the rest of ASEAN, into the Chinese sphere of influence and isolate the US.

As post-pandemic economic recovery becomes a priority for ASEAN, China will take this opportunity to further expand BRI through trade and infrastructure development in the short-term. Over the next couple of years closer China-ASEAN relations will bring relative stability to the South China Sea. However, once the post-pandemic "high" of economic recovery stabilizes, China will shift its focus towards other regions of Asia to ensure the future development of BRI over the long-term and expand their sphere of influence to become a global power rather than just a regional one.

Skeptical players: East Asia

Even though Japan and South Korea maintain strong political relations with the US, they also maintain strong economic ties to China. And while neither country has officially signed an MoU to join BRI, they have both increased their engagement with it, especially through privately funded infrastructure development projects in low- and middle-income countries. This is evidenced by the fact that in BRI Summits held in 2021 and 2022, Japan and South Korea sent representatives from both private entities and government institutions.

Belt and Road is extremely appealing to Japanese investors looking to expand outside of Japan while remaining regional. The high demand for infrastructure development, particularly in Southeast and Central Asia, is a huge potential for cooperation and rapid growth for both Chinese and Japanese companies. And while the private sector is eager to increase cooperation with Beijing to reap the economic benefits linked to Belt and Road, Tokyo remains skeptical of Beijing's hidden political agenda. While other countries jump at the opportunity to develop economically via Chinese loans, Japan continues to tread carefully. Thus, the Japanese approach to BRI will be centered around the private sector looking to pursue their economic ambitions. However, as former Prime Minister Shinzo Abe openly advocated, Tokyo focuses on a “free and open Indo-Pacific” in which Japan's fundamental aim is to “foster regional stability and prosperity by improving connectivity.” However, given the nature of tense relations between China and Japan, it will be interesting to see whether Japan's bid at regional connectivity will include China.

Japan's increased cooperation with China will come at the expense of its close relations with the US at a time in which Sino-American relations continue to deteriorate and destabilize the Indo-Pacific. While the two powers grapple for hegemony, Japan hedges between both as it balances between economic connectivity with China and security protection from the US. This is evidenced by the fact that in 2022 China surpassed the US as Japan's largest trading partner. Yet in 2022, the Japanese government also increased its defense spendingfrom 1% of its gross domestic product to 2% claiming that China is Japan's “greatest strategic challenge ever.” Its eagerness to cooperate with China economically and politically but reluctance to commit to its own national security only places Japan in a precarious position in the deteriorating Sino-America relations.

On the Korean Peninsula, South Korea embraced BRI since it was first launched in 2013. And while never officially joining the project, it has continuously cooperated with Beijing to sustain economic growth and increase its involvement throughout Asia. While South Korean private companies are more than willing to engage in post-pandemic BRI (focused on infrastructure development, the digital Silk Road and the health sector), Seoul continues to tread carefully as it hedges between China and the US. But unlike Japan, South Korea doesn't have the luxury of geographic distance and isolation. North Korea and its biggest ally, China, pose a massive threat to South Korea's national security. As a result, it is crucial for South Korea to maintain stable relations with both China and the US to mitigate the direct nuclear threat that North Korea poses. Swaying in China's favor and sacrificing the protection provided by the US under the 1953 Mutual Defense Treaty, leaves South Korea vulnerable to North Korea's nuclear arsenal right in its backyard. But swaying in the US' favor risks angering the largest economy in Asia and South Korea's largest trading partner. At the moment, it's in Seoul's best interest to hedge between the US and China economically and politically to recover from the fallout of the pandemic while at the same time mitigating the threats looming on the horizon.

Japan and South Korea will continue to hedge between China and the US both out of necessity and comfort. But they will increase cooperation and economic ties with China, mostly through private investment as companies seek to recover from the pandemic and take advantage of China's reopening. Japanese and Korean investment through Belt and Road will also favor Southeast Asia given the geographic proximity and cultural linkage that the region has to both countries. Similar to Chinese investors, Korean and Japanese investors will remain risk averse at least for the short term while they recover economically from the fallout of the pandemic. However, Tokyo and Seoul will avoid signing an MoU with the Chinese government out of fear of the repercussions it might bring about on behalf of the US.

China will take advantage of Japan and South Korea's desperate bids to maintain peace and stability throughout the region to pursue its political objectives undisturbed. By promoting regional connectivity through private investment, China will gain larger political leverage over the US in both countries, making them much more susceptible to Chinese interests in the long term.

Central Asia

The Central Asian countries (particularly Kazakhstan, Uzbekistan and Kyrgyzstan) were among the first to join Belt and Road between 2013 and 2015. Today, China has direct economic, political and security interests in the region which dictate its diplomatic approach towards it.

Economically speaking, China is a key trading partner for the region. Central Asian countries supply China with oil and natural gas while China supplies them with massive investments and infrastructure development projects. And these projects are funded either through direct investment on behalf of Chinese private companies or through short term loans provided by the Chinese government. While the governments of Kazakhstan, Kyrgyzstan and Tajikistan are eager to embrace their role under the BRI umbrella and welcome Chinese investment to promote economic growth, they also become vulnerable to China's debt trap. And it's in China's best interest that Central Asia becomes a compliant participant of Belt and Road for domestic security reasons.

Kazakhstan, Kyrgyzstan and Tajikistan all share a border with the Xinjiang region of China. Over the past couple of years the Chinese government has gone under scrutiny for the human rights violations committed against the Uyghur minority group currently inhabiting Xinjiang. At first, having three countries that share ethnic linkages to the Uyghurs right at the border proved to be a security threat. Under such a threat, it would be extremely difficult for Beijing to react quickly and effectively given that Xianjing is isolated from the rest of the country by mountain ranges, making it difficult to reach in a timely manner.

As a result, Beijing has used BRI as a tool to create a Central Asia policy that is centered around complete economic dependency to coerce these countries into disregarding the Uyghur genocide. Nevertheless, while the governments of these countries are more than comfortable in turning a blind eye, the population has become increasingly vocal in defense of the Uyghurs. Protests in Kazakhstan, Kyrgyzstan and Uzbekistan against Chinese foreign intervention only continue to increase as China inserts itself more into Central Asian politics and economics. Normally, this would not be a problem for the Asian giant which routinely deals with internal opposition. However, as BRI related projects continue to increase throughout the region so does the influx of Chinese workers. And they are increasingly becoming alienated and targeted by the host population of these countries in response to the Chinese treatment of the Uyghurs. If Beijing does not change its Central Asia policy, internal strife will severely hinder the pace at which BRI advances throughout Central Asia.

But Xi Jinping is determined to incorporate Central Asia under his sphere of influence because of the symbolism behind the region. The original Silk Road that connected mainland imperial China with ancient Europe directly crossed through Kazakhstan, Uzbekistan, Kyrgyzstan, Tajikistan and Turkmenistan. In order for Belt and Road to be the “New Silk Road” Xi Jinping needs to fully integrate Central Asia into the Initiative. Central Asia is also the doorway into continental Europe, meaning that the land divisions of Belt and Road (the North Belt and the Central Belt) need to cross through Central Asia to flow towards Europe uninterrupted.

Central Asia is crucial for Chinese domestic and foreign interests. Economically, incorporating Central Asia into the Belt and Road umbrella will advance economic growth and increase regional connectivity. Politically, it will mitigate the threat that Central Asia's ethnic linkage to Xinjiang poses to Chinese national security. Internationally, a Chinese sphere of influence which includes Central Asia will grant China political leverage over other regional and global powers to expand BRI beyond the borders of Asia.

South Asia

One of the most important projects in the entire Belt and Road Initiative is the China-Pakistan Economic Corridor which is set to connect the Xinjiang province of China with the Gwadar Seaport in Pakistan which is located directly on the shores of the Indian Ocean. The massive undertaking is projected to include the construction of railways, highways, seaports, airports and energy infrastructure all with Chinese workers and Chinese funding; either through investment or loans that Pakistan is expected to repay in full and on time. Superficially, the CPEC will bring substantial economic benefits for Pakistan as well as the rest of the region including Afghanistan, Tajikistan, Turkmenistan, Uzbekistan, Kyrgyzstan and Kazakhstan. The CPEC is supposed to be the first step towards economic regionalization and China's bid at peace and development in South Asia. However, a series of problems arise when the project is analyzed further. Firstly, if Pakistan is unable to repay the loans provided by China to carry out the project, then Pakistan would be forced to repay its debt to China in another way. This is a very plausible scenario given the fact that Pakistan is currently undergoing its biggest economic crisis since its independence. The Pakistani government is under extreme pressure to reach an agreement with the IMF that would stabilize the rupee and lead to a decrease in the price of basic goods. But given that a loan provided by the IMF would not be enough to revitalize the economy, Pakistan must also rely on other lenders for support, such as China. If China were to support Pakistan, most likely, the Pakistani government would have to sacrifice the ability to exercise complete autonomy over its territory and hand such power over to China. In this scenario, Pakistan's biggest asset, the Gwadar Seaport, would be leased over to China. This would result in an even larger geopolitical conflict with India, which has been engaging in open conflict with Pakistan since 1948.

China's biggest competitor in the Asian subcontinent in terms of population, economics and regional influence is India. Despite not being involved in the Initiative at all, the mere existence of Belt and Road poses a massive security and political threat for India. First, China's “jewel project” the CPEC, directly crosses through the Pakistan-administered Kashmir; a highly disputed region on the Indo-Pakistani border. For years, India has argued that the CPEC directly violates Indian sovereignty because of their claim over the entirety of the Kashmir region as Indian territory. If China builds the CPEC through the Pakistan-administered Kashmir, it would delegitimize India's entire claim over the region, given that now Pakistan, with the support of China, would have larger strategic, economic and political leverage. In addition to the fact that the CPEC would bring economic prosperity to Kashmir meaning that internal sentiment would sway in Pakistan's favor.

And while India worries about their biggest enemy growing on the western front, China is actively trying to surround and isolate India from the sea. The “String of Pearls” doctrine is a network of Chinese administered military and commercial seaports strategically located throughout the Indian Ocean. The “pearls” represent seaports in Myanmar, Bangladesh, Sri Lanka and Pakistan built or upgraded with BRI sponsored investment to establish Chinese presence and support their trade and military interests.

The String of Pearls strategy is cause of concern in New Delhi because of the fact that China could easily limit India's influence and presence in the Indian Ocean as well as prevent it from freely acting in terms of trade related activity, military development and political interests. So, even though China cannot exert influence over India through BRI, it can pressure India into silent compliance through coercion. The String of Pearls strategy could create a China-led economic and political order in Asia which India would not be able to counter. This, in addition to the fact that at the moment the Indian navy is no match to the Chinese navy, puts India in an extremely precarious position as it loses political, economic and military influence throughout the Indo-Pacific.

The first evidence of the String of Pearls strategy manifesting itself is the case of the Hambantota seaport in Sri Lanka. Construction in the southern Sri Lankan port started in 2008 mostly funded by Chinese investment as part of the Belt and Road Initiative. Once the port was completed, China had invested approximately $1.5 billion on the entire project; all of which had to be repaid in full over an established period of time. However, when the Sri Lankan government was unable to repay the annual indemnification amounts, they were forced to lease the port to China for 99 years in exchange for debt relief. However, Sri Lanka's massive remaining debt to China (and other countries) is one of the main causes of the Sri Lankan economic crisis which started in 2019. Despite numerous currency swaps with Both India and China, Sri Lanka has been unable to financially recover from the crisis.

The Hambantota Port is a textbook example of China's debt trap diplomacy strategy in Asia. It is a key part of China's strategic interests in the Indian Ocean located at the heart of the “String of Pearls” and close enough to India to serve as a constantly looming threat. It also plays a key role in the development of the Maritime Silk Road because it is located at the entrance of the Strait of Malacca which is crucial to Chinese maritime trade.


Investment trends throughout Asia only further prove that China remains committed to the short-, medium- and long-term development of Belt and Road. And post-pandemic investment will still be focused on Asia (particularly Southeast and Central Asia) where investment patterns are much more stable and predictable. This does not mean that Beijing will completely neglect other member countries but will prioritize creating a stable foundation for the Initiative through regional connectivity in the short term to secure the success of Belt and Road globally in the long term.

China's most important foreign policy pillar is its policy of non-interference in the affairs of other states. It defines its identity not as an invading power but as an aiding power that should be welcomed by countries as an alternative to the US. This is exactly what BRI is enabling it to do throughout Asia. Legally, China is not interfering in other states because Belt and Road is an investment, lending and infrastructure development network. But it is clear that China is using Belt and Road as a means to achieve its political objective throughout the Asian continent.

And its main objective is much more political than economic in nature. China wishes to tackle the US led international order and establish itself as the global hegemonic power. Strategic investment throughout Asia only further proves that China is trying to create a regional sphere of influence while at the same time mitigating the influence of rival powers. And if it continues to encourage regional economic connectivity and persuade hedging states to sway towards it, China will soon displace the US as the dominant power in Asia. Once it does so, it will pave the way for Belt and Road to expand globally and create a new international order with China at the helm.