Worsening tensions between China and the United States in the wake of the COVID-19 pandemic have the potential to jeopardise key Belt and Road projects.
At the end of August the Trump administration placed sanctions on 24 of China’s state-owned enterprises on the grounds that they had helped to “militarise” outposts in the South China Seas.
Included on blacklist is state-owned engineering giant China Communications Construction Company (CCCC), which plays a key role in the development of the Belt and Road Initiative.
Andre Wheeler, author of China’s Belt Road Initiative, said to China Banking News that the blacklisting of CCCC could have a major disruptive impact on Belt and Road projects.
“With the CCCC being involved in 923 projects in 157 countries, the sanction will disrupt a number of BRI projects, including Malaysia’s USD$10.5 billion East Coast Rail Link, the $1.4 billion Port City of Colombo, as well as the Cebu International Bulk Terminals, Israel’s water desalination plant and the Kyauk Phyu (Myanmar) Deepwater Port.”
Wheeler sees the sanction has having an especially big impact on Belt and Road projects in Sri Lanka, where China has played an instrumental and much-criticised role in the development of the Hambantota Port.
“The US has blacklisted CCCC and 5 of its entities, including the China Harbour Engineering Company (CHEC) that is directly involved in Colombo and Hambantota.
“Essentially, the US blacklist includes not allowing any trading to take place with or along any infrastructure built by CHEC.
“This will reduce foreign investment confidence in those projects that need these assets to transition to commercially viability.”
Wheeler also sees the sanctions as having a deleterious impact on Belt and Road projects in the Middle East.
“[The sanctions] could be a major deterrent, particularly those in the Israel and UAE context,” said Wheeler.
“With these two countries having worked closely with the USA to broker a peace deal, this potentially puts at risk the significant trade volume that passes from China to the Middle East via the UAE.
“60% of all Chinese exports to the MENA region passes through the UAE.”
In a broader context, Wheeler sees the roadblocks placed on US tech exports to China as hampering Belt and Road projects by denying Chinese companies access to certain advanced technologies that it is not yet capable of producing independently.
“Despite what is claimed by China with regards to information and communications technology and the digital revolution, it is still dependent on the USA for advanced engineering technologies,” said Wheeler.
“[Sanctions] will have a profound impact on the implementation of a fully integrated Digital Silk Road with the BRI.
“China will have difficulty accessing items such as micro-processer boards and chips, putting projects like Colombo Port City at risk.
“The potential land sales, targeted at $3.4 billion in the Colombo Port City project, may well flounder as Huawei and CHEC are blacklisted by the US.”