In trying to understand China's international agenda, and in particular the concept of the One Belt And One Road initiative, my main concern is that the size of the loan is over-focused as a measure of thOne Belt And One Roadccess of the BBB1.This approach is wrong for three reasons.
First of all, when Chinese President Xi Jinping launched the "One Belt And One Road" initiative in Kazakhstan in September 2013, he did not just mention infrastructure. In fact, in his speech, he specifically mentioned five goals for initial cooperation: policy communication, road connectivity, unimpeded trade, currency circulation, and people-to-people connectivity.
China's policy bank loans consist of a range of concessional and non-concessional loans, mainly provided by the China Development Bank and the Export-Import Bank of China.If one proposes that the size of lending by Chinese policy banks is a measure of a project's long-term direction or even short-term success, one is forgetting the core element of the One Belt And One Road's actual agenda.A more nuanced assessment of OBOR's progress might be that, in terms of the goal of improving "policy communication," the change in the loan size may reflect the success of One Belt And One Road.
Second, China's development finance lending is broader than major policy banks' loans for large infrastructure projects in developing countries.While CDB and Exim's sovereign loans are an important part of China's broader "One Belt And One Road" agenda, they are far from the only type of lending, let alone investment.
One example is the $850m in financing that CDB and Bank of China provided to the Export-Import Bank of Africa in 2015.Indeed, even loans from these policy banks are increasingly being negotiated not with debtor countries on a project basis but with regional and national financial institutions.In 2015, for example, CDB lent $3bn to Indonesia's state-owned Mandiri Bank, People's Bank and State Bank Indonesia.The local banks agreed to work with Indonesian and Chinese contractors to invest in high-speed and light rail, airport renovation and energy projects.
A third reason lending is not enough to measure progress in One Belt And One Road construction is that microfinance can also produce transformative results.A recent paper by Danny Rodrik, a professor at Harvard University, says that while big companies are the most productive and innovative in Africa, it is small firms that create jobs.Thus, the provision of microcredit to African financial institutions to increase their capacity to lend to SMEs could change the local development landscape as much, if not more, than a flagship infrastructure project.The same is true of China's soft power in these regions.
The use of loan size data as an indicator of the progress of the Belt and Road projects is flawed.It is clear that lending to infrastructure projects, particularly at the official level by policy banks, is only one perspective from which to view the One Belt And One Road's vision for global development.