The strategic plan 'Made in China 2025' (first announced by Premier Li Keqiang in 2015) focuses on technologically advanced industries, many of which are relevant for the digital dimension of the Belt and Road Initiative, the so-called Digital Silk Road (DSR). The consequences of the coronavirus pandemic might be a catalyst for the advancement of the DSR, which illustrates China´s agility. The DSR focuses on, amongst others, cloud computing, nanotechnology, quantum computing, big data, artificial intelligence (AI), and smart cities. The Sino-US trade war and geopolitical competition is influencing global flows of big data through undersea fiber-optic cables, proficiency in AI and advancements in the semiconductor industry [Is China Threatening America’s Dominance In The Digital Space?].
The Chinese government promotes the DSR for public security purposes for developing countries, where it builds ’safe cities’ in dynamic areas in some Pakistani cities, such as Islamabad or Lahore. CloudWalk, a Chinese company, has an agreement with the government of Zimbabwe to build a facial recognition program that is integrated with biometric technology. In the words of Peter Layton, through such cooperation programs, ‘The BRI may develop Xinjiang characteristics’ [Belt and Road means big data and facial recognition, too].
On the financial side of BRI, the solvability of developing BRI-partner countries has become challenging, due to the combination of CVOID-19 and the precipitous decrease in oil prices earlier this year. On April 15th, the G-20 countries announced a debt moratorium for the lowest-income countries. This affects the BRI adversely. Nonetheless, China announced to write-off zero-interest loan debts by African countries that are due this year and instructed Chinese financial institutions to conduct ’friendly-negotiations’ with African countries on commercial-based sovereign debt, which encompassed $ 250 billion. A possible approach would involve restructuring the debt through a combination of extension, yuan denomination, write-down, debt-to-equity swap and write-off [How will China handle multiple debt repayment crises?]. This approach focuses on retaining as many assets as possible. The current situation, though highly challenging, provides an opportunity for China to internationalize the yuan. In this sense, debt restructuring might help both creditor and lender.
Ali Çikmazkara
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