Analyzing China’s Belt and Road Initiative from a World Systems Perspective

During an official visit to Kazakhstan in 2013, Chinese president Xi Jinping announced the beginning of the Belt and Road Initiative (BRI), a plan to increase global cooperation and economic integration. Considered a modern version of the ancient Silk Road that initially connected Europe and Asia, the plan involves closer diplomatic relations and major investments in infrastructure across the continent, designed to connect the various Asian economies and further the process of globalization. Many have praised the Chinese government for the initiative, believing it would greatly benefit developing countries and lead to a more equitable international sphere. But this has not been the case. While the BRI project has contributed to global integration and stronger diplomatic relations, the project has also brought about a form of dependency between China and its partner countries, presenting a new form of core-periphery relations as theorized in Immanuel Wallerstein's World Systems Theory.

Wallerstein’s World Systems Theory proposed a new method of analysing the international sphere based on a social system, in which the defining characteristic of the system would be the division of labour. The focus of his analysis was on the interactivity of world systems, which he defined as a single division of labour and multiple cultural systems. He further argues that the only world system that exists today is the capitalist world economy, of which the critical feature was “production for sale in the market” with the goal of maximizing profit. The pervasiveness of capitalism and the single division of labour led to various degrees of specialization that created a structured hierarchy within the world system, split between the core, periphery and semi-periphery.

Based on Wallerstein’s theory, core states are defined as the advanced economies that benefit the most from the capitalist world system, with strong state bureaucracies and higher skill specialization, while periphery states are those with weaker bureaucracies that transfer their major resources to the core states. The states that hover in between both poles are semi-periphery states, often being used themselves to aid the core states while also exploitative of the periphery. What defined their positions in the core-periphery dynamic was the converging of capitalist interests in north-western Europe towards the end of feudalism that led to the creation of strong state mechanisms whereas in the periphery, those interests diverged and created weaker mechanisms. The evolution of capitalism has helped the European economy spread and fully encapsulate the world as we know it today, adding outsider state systems into the core-periphery hierarchy. The current state of the capitalist world system is still geared towards the West, but now faces a challenge to its dominance from China and the BRI, which aims to establish China as a core area of the world system and assert its dominance on those in its periphery.

The BRI is a major foreign policy strategy launched by Chinese President Xi Jinping, and is aimed at global economic integration between China and the economies of central Asia, Europe and Africa. Inspired by the original Silk Road that had connected the world centuries ago, the new project has two arms: The Silk Road Economic Belt (SREB), which would run through the Eurasian landmass, and the Maritime Silk Road (MSR), which would extend from the Indian Ocean and Suez Canal into the Mediterranean. To achieve this, China has embarked on large scale development of hard and soft infrastructure. The hard infrastructure involves the building of oil pipelines, high speed railways for transportation of goods, ports on the MSR, and other physical facilities, while soft infrastructure refers to the development of institutions for easier economic integration such as the Asian Infrastructure Investment Bank (AIIB), free trade agreements, closer diplomatic relations and other ties. The initiative has been very popular globally, attracting over 60 countries with an estimated cost of around 6 trillion USD. However, despite the win-win scenario envisioned by Chinese politicians when selling this plan internationally, Wallerstein’s ideas of unequal exchange are re-emerging and the BRI is slowly creating a new form of dependency, with China at the core of the new global economy.

Sri Lanka is a prime example of how the Chinese state has leveraged financial dependence over smaller countries for political or economic control. In the case of Sri Lanka, the exploitation comes from Chinese control of a major port. The tiny South Asian country contracted a loan of US$8 billion with 6% interest from China to build the Hambantota port, with expectations that it would be a key installation on the MSR and facilitate economic growth. This was tied in with other building projects promised to then-Sri Lankan president Rajapaksa. However, the port was essentially a white elephant, expensively built but with no proper use. Unable to pay off the debt, the Sri Lankan government signed a deal with China Merchants Port Holdings, a state-owned enterprise, that gave China 70% of the port’s shares on a 99-year contract, along with plots of land adjacent to the structure. In this case, Sri Lanka has now become dependent on China, losing political and economic autonomy to make sound public investment decisions due to the high levels of debt incurred by Chinese-built infrastructure. Despite attempts by newcomer president Sirisena to end Sri Lankan involvement in the BRI through the cancellation of future projects, the government may agree to additional BRI-related financing . According to a senior Sri Lankan official, the funding from Beijing could reach as high as US$24 billion, leaving the country even more dependent on China.

China’s economic leveraging has also occurred in sixteen Central and Eastern European Countries (CEEC), which include the likes of Hungary, Albania, Montenegro and others in the region. Policymakers in these countries hoped that the promises of the BRI to increase connectivity through infrastructure building would allow for two-way trade flows between the CEEC and China, helping to reduce the trade deficit borne by the former. However, this was not the case. While there were initial improvements in trade with an increase of CEEC exports, they did not last long. Exports fell back to pre-BRI levels within two years of the new trade ties. However, in 2015 the trade deficit of the CEEC with China reached new highs, hitting over €27 billion. Additionally, the building of new infrastructure and plans for economic growth for both parties were riddled with concerns. A report from the Center of Strategic and International Studies (CSIS) showed that 89 percent of contracts awarded to carry out infrastructure projects in the BRI were given to Chinese companies. This occurred in the CEEC as well, as only some portions were built by local workers while most of the economic benefits were directly channeled to Chinese companies, adding little value to the local CEEC economies.

While the BRI has contributed to global integration and remains a promising idea for greater interconnectivity, it has instituted a new form of dependency. Wallerstein’s world systems theory and explanation of core-periphery relations that arise from the establishment of a capitalist world economy is used to show that the expansion of capitalism has simply furthered the means of exploitation available to core states. Cyclical changes in dominant powers simply reproduces core-periphery exploitation, now being used by the Chinese state at the expense of its neighbours.