Analyzing the China Investment Corporation's Engagement under the Proposed Belt and Road Oversight Act
By Salar Ghahramani
Abstract: The proposed Belt and Road Oversight Act, currently under consideration by the U.S. Senate's Committee on Banking, Housing, and Urban Affairs, outlines an extensive system to scrutinize investments by China's sovereign wealth funds, including the China Investment Corporation (CIC), in the context of the Belt and Road Initiative (BRI). The Act calls for wide-ranging reporting, examination, and strategic planning by assigned "Country China Officers" in U.S. embassies across the globe. This brief provides an overview of the proposed legislation, highlighting its potential implications for monitoring and understanding the influence of the CIC and other Chinese entities within the BRI.
Introduction: The Belt and Road Initiative (BRI) is a comprehensive project by the Chinese government to increase regional integration and expand its global influence. The initiative includes numerous infrastructure projects, primarily financed by China's banking systems and sovereign wealth funds, such as the China Investment Corporation (CIC). The proposed Belt and Road Oversight Act ("the Act"), now being considered by the U.S. Senate's Committee on Banking, Housing, and Urban Affairs, is intended to enhance scrutiny of these investments, but, if passed, would likely add to the existing points of geopolitical contention in international economic affairs between the two countries.
The Proposed Belt and Road Oversight Act: The Act, if passed, would put in place a system for monitoring and reporting on China's activities worldwide. This includes designating a "Country China Officer" in each U.S. embassy, tasked with compiling comprehensive reports on Chinese government's equity and assets within their respective countries. The responsibility extends to tracking infrastructure projects funded by the Chinese banking system, its sovereign wealth funds, and international financial institutions.
China Investment Corporation's Role and Influence: As a prominent sovereign wealth fund active in the BRI, the CIC plays a significant role in China's foreign investments. Understanding its investments is critical for comprehending the breadth of China's economic influence. The proposed Act, with its comprehensive reporting requirement, could provide a means to evaluate the extent of CIC's involvement, associated risks, and the broader implications for economies receiving these investments.
Debt Obligations, Collateral, and China's Assets: The Act also proposes an evaluation of each country's total debt obligations to China. An understanding of these obligations is key, given their potential to highlight economic vulnerabilities tied to the BRI. The reporting would entail detailing any known or speculated collateral tied to the debts accrued by BRI projects and identifying assets owned by Chinese entities within these nations.
Strategy to Counter China's Influence: The proposed Act calls for the development of a comprehensive, country-specific strategy to counter China's influence by each Country China Officer. This strategy aims to equip diplomatic personnel with the means to mitigate China's impact. Annual reports summarizing these strategies, alongside the identification of specific challenges and opportunities linked to China, are to be provided under Act.
Assessing Procurement Needs and Alternative Financing: The Act encourages analysis of potential procurement and infrastructure needs and the likelihood of Chinese financing for such projects. It recommends that the United States International Development Finance Corporation focus on providing alternative financing opportunities, particularly for countries targeted by the BRI.
Implications: The proposed Belt and Road Oversight Act presents a comprehensive system for tracking, evaluating, and developing responses to China's growing global influence through the BRI. By zeroing in on Chinese entities like the China Investment Corporation, the Act, if passed, could provide a detailed understanding of China's overseas investments and their implications for international economics and geopolitics by US policy-makers but could also create additional points of contention between the two countries.
Salar Ghahramani is the founder of Global Policy Advisors.