The Colombo Port City Project (CPC or the “Project”) is the most prominent Chinese direct investment in Sri Lanka. The case study highlights the prospects and resilience of a BRI project in the cyclical process of democratic decay and consolidation in a host state with democratic dispensation and welfare commitments. It traces the geopolitics of the day and dynamics between the transnational discourse on human rights and investment. From a Chinese perspective, it reveals the contingencies of each BRI project and the inherent entanglement between the politics of the Chinese state and its corporations involved in the BRI with the sociopolitical realities of a host state. From a Sri Lankan perspective, this study reveals the different political and legal narratives around the Project, the challenges these generated, and the resilience of the Project. It combines a legal doctrinal approach with commentary on its political economy, focusing on the litigation and legislation concerning the CPC. Further, it offers insights into the prospects for dealing with foreign investment-related legal disputes through the public law of a host state, thereby capturing the methods by which the domestic legal sphere of a host state responds to the BRI.

This chapter reviews the first six years of implementation of the Belt and Road Initiative (BRI), a major Chinese foreign policy initiative introduced in 2013. The authors explain how China’s transition from benefactor to banker, in con- junction with its push for expanded influence on the global stage, led to the adoption of the BRI. They then consider whether and why China might choose to ‘multilateralize’ the BRI. The authors conclude that if Beijing wants to multilateralize the BRI, it will need to either comply with—or help redesign— international development finance rules and standards. At the same time, the establishment of an inclusive and revitalized development finance regime does not rest solely on the shoulders of Beijing. If OECD-DAC and multilateral donors and creditors wish to avert a crisis of confidence and relevance, they will need to rewrite international development finance rules and norms in ways that accommodate Beijing’s interests and more effectively account for the preferences of low-income and middle-income countries.

This chapter introduces the central argument of the book: that China’s 21st- century transition from a “benefactor” to a “banker” has had far-reaching im- pacts in low-income and middle-income countries that are not yet widely understood. Beijing’s growing use of debt rather than aid to bankroll big-ticket infrastructure projects has created new opportunities for developing countries to achieve rapid socioeconomic gains, but it has also introduced major risks, including corruption, conflict, and environmental degradation. Some countries are more effective than others at managing these risks and rewards. This chapter “zooms in” on two countries—Sri Lanka and Tanzania—to illustrate the tension between efficacy and safety confronted by developing countries banking on Chinese development finance. It also provides a roadmap for the rest of the book.

What are the Chinese government’s motivations behind promoting overseas ?nancing, trade, and investment? To what extent are these motivations geopolitical, geoeconomic, domestically driven, or purely commercial? Compared to private creditors, how does the "visible hand" of the Chinese government affect China’s policy bank lending terms? What are the strengths and weaknesses of state-led capital, and how persistent might this creditor approach be over the long run? Understanding China’s goals as an international creditor helps us evaluate the sustainability of these investment ?ows over time, and ultimately the potential costs and bene?ts for Latin American debtors. Given that ?ve of the top ten international borrowers from China are in Latin America we can simultaneously evaluate China’s global banking strategy and examine questions about its policy banks’ lending behavior outside of the Asian region. For example, are their operations more commercially oriented outside of East Asia, or equally geopolitical beyond regional borders? To what extent is a state-led approach to global capital formation, focusing on market rather than profit maxmization, sustainable outside of China?

In Chapter 8, I carry out a quantitative study of the determinants of RMB internationalization, focusing on assessing the potential of the RMB as an international payment currency. I present an econometric study to demonstrate that financial development and capital account openness are distinctly more important than the GDP of China in determining the share of the RMB in international payments. I carry out a regression analysis to identify the determinants of bilateral inter-country payments flows by currency. Then, I use the model to predict the future share of the RMB in global payments. I find that, in the best-case scenario, the RMB can possibly become the (distant) third payment currency (behind the USD and euro) by 2025. However, despite China’s large expected economic size, it would be hard for the RMB to come even close to the status of the euro as a payment currency because it would be hard for China to attain the required levels of financial development and capital account openness, given the underdevelopment of China’s institutions. I also carry out a very simple exercise to estimate the impacts of the Belt and Road Initiative on the payment share of the RMB and its share in denominating international debt securities.

This chapter analyzes China’s impact on the global governance of export credit. For decades, the OECD Arrangement has been held up as a successful example of liberal trade governance, with its system of disciplines proving highly effective in preventing a destructive, competitive spiral of state subsidization via export credit. I show, however, that the rise of China has profoundly altered the landscape of export credit and disrupted its governance arrangements. China has emerged as the world’s largest provider of export credit, but China has refused to join the Arrangement and it has persistently thwarted efforts to negotiate a new set of international rules. China has little incentive to agree to disciplines on its use of export credit, which plays a central role in its development strategy. Despite considerable US pressure, China has refused to capitulate and subject itself to international disciplines that it views as fundamentally against its interests. China has shown that it has sufficient power to stand up to the US in defending its development interests. Yet the result, I argue, is that China’s rise is undermining the liberal regime for governing export credit by eroding the efficacy of existing disciplines and blocking efforts to construct new ones.