Tutorial 10 Problem set Questions & Solutions
Topic 7: Belt and Road Initiatives (BRI)
- Short-answer Question 1 (SAQ1)
- Short-answer Question 2 (SAQ2)
- Short-answer Question 3 (SAQ3)
- Short-answer Question 4 (SAQ4)
- Long-answer Question 1 (LAQ1)
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SAQ1
Answer the following questions regarding the Belt & Road Initiative (BRI).
a) What is BRI? What do ‘Belt’ and ‘Road’ mean, respectively?
▻ In 2013, Chinese President Xi Jinping announced the “One Belt One Road Policy” –
commonly referred to as the Belt and Road Initiative, “a bid to enhance regional
connectivity and embrace a brighter future”. The project is commonly referred to as the
New Silk Road, as it bears a strong resemblance to the original Silk Road which created
a trade network in the Central Asia region during China’s Han Dynasty.
▻ Belt is short for "Silk Road Economic Belt”, referred to as overland routes for road and
rail transportation
▻ Road is short for "21st Century Maritime Silk Road”, referred to as maritime passages
through Southeast Asia to South Asia, Middle East and Africa
b) What’s the role of Asian Infrastructure Investment Bank (AIIB) on the development of BRI?
▻ The financial arm of the BRI is the Asian Infrastructure Investment Bank (AIIB).
▻ Asian Infrastructure Investment Bank (AIIB) was established on 25 Dec 2015 and started
to operate on 16 Jan 2016. Its registered capital was 100 billion USD with its headquarter
located in Beijing, China.
▻ The primary goals of AIIB are to address the expanding infrastructure needs across
Asia, enhance regional integration, promote economic development and improve public
access to social services.
▻ AIIB has 102 members all over the world.
c) What’s are the trade and economic objectives of BRI?
Trade:
o Remove physical bottlenecks to trade in Eurasia
o Foster new export markets for Chinese goods
o Promote the renminbi’s (RMB) internationalization through billions of RMB-
denominated transactions related to project payments and loans
Economic:
o Accelerate economic growth and state-owned enterprise (SOE) profits through new
infrastructure contracts
o Prepare domestic Chinese companies for global competition through exposure to
international projects and management practices
o Pair ongoing SOE restructuring with a favourable business environment for
completing contracts
o Find new avenues for credit expansion and economic growth outside of China
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d) What’s the non-economic objectives of BRI?
Political:
o Project a softer image to neighbours by demonstrating leadership, generosity, and a
commitment to clean energy investment
o Showcase China-led multilateral institutions, build credibility and standing among
international agencies
o Create a foreign policy legacy for Xi Jinping’s presidency
Military:
o Secure strategic access to ports and air facilities through commercial investments in
poor but politically friendly countries. B&R investments such as Gwadar Port in
Pakistan and Hambantota port in Sri Lanka have raised alarm in India that China
plans to encircle the region
o In the course of securing projects and running supply lines, expand China’s naval
and military reach in Belt and Road geographies
Security:
o Bring stability to China’s poorer Central and Western provinces through accelerated
economic development and physical connection to the rest of China
o Open alternative routes for oil and gas imports. Roughly 80% of China’s energy
supplies today pass through the narrow Malacca Straits
SAQ2
Read World Bank report- ‘Belt and Road Economics, Opportunities and Risks of Transport Corridors’,
and discuss:
a) What opportunities do BRI bring to the global economy?
▻ Infrastructure and policy gaps in Belt and Road corridor economies hinder trade and
foreign investment. New infrastructure can help close these gaps, but it is costly - and
investments are occurring in the context of rising public debt.
▻ BRI transport projects can expand trade, increase foreign investment, and reduce
poverty—by lowering trade costs. Yet, for some countries, the costs of new
infrastructure could outweigh the gains.
▻ Complementary policy reforms can maximize the positive effects of BRI transport
projects and ensure that the gains are widely shared. For some countries, reforms are
precondition to having net gains from BRI transport projects.
b) What risks do BRI bring to the world?
The BRI presents risks common to large infrastructure projects. These risks could be
exacerbated by the limited transparency and openness of the initiative and the weak
economic fundamentals and governance of several participating countries.
o Debt Sustainability Risks: Among the 43 corridor economies for which detailed data is
available, 12—most of which already face elevated debt levels—could suffer a further
medium-term deterioration in their outlook for debt sustainability.
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o Governance Risks: Moving toward international good practices such as open and
transparent public procurement would increase the likelihood that BRI projects are
allocated to the firms best placed to implement them.
o Debt Sustainability Risks: Among the 43 corridor economies for which detailed data is
available, 12—most of which already face elevated debt levels—could suffer a further
medium-term deterioration in their outlook for debt sustainability.
o Governance Risks: Moving toward international good practices such as open and
transparent public procurement would increase the likelihood that BRI projects are
allocated to the firms best placed to implement them.
SAQ3
Compare BRI project and Marshall Plan (European Recovery Program provided by the US after the
World War II), what do they have in common? What do they have in difference?
Table 1 Comparison between Marshall Plan and BRI
Marshall Plan BRI
[Link] Excess industry capacity after the Excess industry capacity after the
Export end of WWII and declining military 2008-09 Chinese economic
demand stimulus plan and declining
Western consumption demands
[Link] Replacing GBP as an even more Internalisation of RMB, a yet
influential currency to foster global inconvertible, closed currency
stability
[Link] a Hedging the growing influence of Hedging US control of essential
rival Soviet Union in Europe trade routes and energy supply
[Link] Ensure geopolitically countries like Dividing existing organisations like
strategic Germany to be at least not fully APEC by providing infrastructure
division under Soviet rule to member states which are dire in
need
[Link] away Offering aids to Soviet satellite AIIB to improve major EU members
diplomatic states e.g. Yugoslavia e.g Central Europe ‘V4’
support
SAQ4
In 2018, Premier Daniel Andrews signed a memorandum of understanding with Beijing to make Victoria
a member of the BRI – the only state government in Australia to do so. Briefly discuss advantages and
disadvantages of joining BRI for Victoria.
Advantages of joining BRI for Victoria:
o Infrastructure development/upgrade e.g. new rail trains.
o Exports doubles.
o FDI from China more than triples.
o Aggregate demand, economic growth and employment.
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Disadvantages of joining BRI for Victoria:
o National security.
o Inter-state and international relationships.
o Import-competing industries e.g. manufacturing and automotive sectors.
o Dependence on Chinese economy.
LAQ1
Select one member of BRI project, conduct some research and discuss the impacts of joining BRI on
this selected economy from the following aspects:
a) Infrastructure development
b) Economic Growth and Trade Balance
c) Employment Opportunities
d) Potential Risks
We have chosen Indonesia: See the report ‘Indonesia’s Global Maritime Fulcrum & China’s Belt
and Road Initiative.’1
There are strong incentives to connect Indonesia’s Global Maritime Fulcrum (GMF) policy with
China’s Belt and Road Initiative (BRI). However, various local political and cultural issues
hamper the implementation of the BRI in Indonesia while Indonesia’s GMF is domestic-focused.
a) Infrastructure:
o High speed railway links between 1) Jakarta and Surabaya; 2) Jakarta and Bandung.
o 28 further projects worth USD91 billion.
b) Economic Growth and Trade Balance:
o In 2018, Indonesia exported a total of $197B, making it the number 28 exporter in the
world. During the last five reported years the exports of Indonesia have changed by -
$8.72B from $206B in 2013 to $197B in 2018.
o The most recent exports are led by Coal Briquettes ($22.1B), Palm Oil ($16.7B),
Petroleum Gas ($10.8B), Crude Petroleum ($5.52B), and Rubber ($4.41B). The most
common destination for the exports of Indonesia are China ($28.1B), Japan ($20.4B),
United States ($19.7B), India ($14.5B), and Singapore ($14.4B).
1Lalisang, A. E. Y., & Candra, D. S. (2020). Indonesia’s Global Maritime Fulcrum & China’s Belt and Road Initiative. (URL:
[Link]
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c) Employment Opportunities:
o Infrastructure projects themselves create hundreds of thousands of jobs.
o With rapid economic growth and budgetary revenues, Indonesian government may
increase public expenditure and create more job opportunities.
d) Potential Risks:
o The implementation of both the GMF and BRI are highly top-down, resulting in
relatively good government-to-government relations, but lacking in business-to-
business and people-to-people development, while the relations also suffer from
Suharto regime’s three decade ban of Chinese language and culture in Indonesia.
o It is doubted that the GMF and BRI will further Indonesia’s strategic interest in areas
besides diplomacy and investment. Because various domestic political constraints
as well as a seemingly top-down approach with no bottom-up backup in the
implementation of both the BRI and GMF, shows relatively weak result in terms of
economic cooperation and people-to-people relations.
o Based on the data gathered in this paper, Indonesia–China bilateral interactions
following the implementation of China-led BRI seem to have improved. Diplomatic,
economic, and people-to-people bonds all show improvement and increasing trends.
However, whether the improvement is caused by the BRI and GMF policies is rather
dubious. There are apparent similar focuses on economic cooperation between the
BRI and GMF. But, it should be noted that even in terms of economic cooperation,
Indonesia signed a BRI Memorandum of Understanding with China relatively late in
October 2018. Moreover, even though there is an increased number of improvements
in most sectors, several issues including the South China Sea, anti-Chinese
sentiment in Indonesia, as well as bureaucratic red tape continue to prevent a more
comprehensive cooperation between the two countries.
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