Chinese construction and engineering contractors engaged in the Belt and Road Initiative (BRI) are confronting substantial challenges in democratic countries, as revealed by recent research. These difficulties are compounded by close ties with the United States and the presence of institutions that enable public opposition, which hinder the activities of Chinese contractors in less authoritarian states. The research, led by Andrea Ghiselli from the University of Exeter and Pippa Morgan from Duke Kunshan University, underscores the significance of these companies in constructing the infrastructure central to the BRI, which is President Xi Jinping’s flagship foreign policy endeavour.
The challenges increase notably when a host country formalises its participation in the BRI by signing a Memorandum of Understanding (MoU). Such events are significant and highly visible, drawing attention from various quarters, including the public, elites, and international actors like the United States, who are sceptical of Chinese involvement. The study, published in International Studies Quarterly, also found that Chinese contractors tend to win more contracts in resource-rich nations that have larger populations, stronger trade ties with China, more excellent political stability, and receive more financial aid from China.
Conversely, the findings indicate that Chinese infrastructure contractors are less successful in countries that are geographically distant from China, have differing voting alignments at the UN, or borrow heavily from the World Bank. Additionally, a negative association was noted between NATO membership and the value of contracts secured by these contractors, suggesting geopolitical alignments also play a critical role.
No evidence was found to suggest that the BRI helps to mitigate the challenges faced by Chinese contractors in democratic countries. Dr Ghiselli noted the conflicting goals of the BRI in such settings. While the initiative aims to enhance China’s diplomatic influence and expand its corporate footprint overseas, these objectives often clash when the partner country operates under a democratic system. This tends to favour Chinese contractors’ success in non-democratic countries, increasing the Chinese government’s stake in those nations’ stability by expanding the presence of Chinese citizens and investments.
Dr Morgan highlighted the detrimental relationship between the host state’s democratic institutions and Chinese firms’ success in securing overseas infrastructure contracts. Democratic institutions enable domestic and international forces to restrict business opportunities for Chinese contractors. Commenting on the adverse effects of signing a BRI MoU, Dr Morgan pointed out that such actions trigger significant backlash within democratic nations, pressuring governments to limit Chinese economic participation and leading to unintended negative consequences for Chinese contractors.
The study presents a significant negative correlation between democratic institutions in host countries and the contract values awarded to Chinese engineering and construction companies. This interaction between liberal democracy and the BRI is markedly negative and statistically significant, suggesting that the more pronounced the democratic institutions, the more adverse the impact on contract volumes associated with BRI participation.
For countries with minimal levels of democracy, the relationship between MoUs and infrastructure contracts is positive. However, for more democratic states, this relationship turns negative. The research concludes that the BRI’s high visibility and significance may ironically contribute to its challenges in democratic countries. The analysis suggests that China might need to adopt a lower-key approach in its BRI diplomacy if it wants its companies to succeed in democratic environments. This could have broader implications for economic development and financial aid in democratically governed but economically disadvantaged countries, potentially delaying their growth or increasing development costs.
More information: Andrea Ghiselli et al, Blowback: When China’s Belt and Road Initiative Meets Democratic Institutions, International Studies Quarterly. DOI: 10.1093/isq/sqaf014
Journal information: International Studies Quarterly Provided by University of Exeter