State capitalism and global governance under the belt and road initiative

Major powers influence the design and implementation of global rules to their own advantage. Globalisation has led to asymmetric engagement and opportunities, although standard theory would lead one to expect that all countries will benefit evenly. The resulting unequal opportunities under the existing institutions trigger increased nationalist pushback, while a new power is seeking to integrate its own institutional approaches into the global policy architecture. During this geopolitical transformation, the contestations are even sharper in the context of globalising economic orders and legal norms. With its enormous financial capacity, China has been building up its soft power through a “Belt and Road Initiative” (BRI), which differs from existing treaty-based integration concepts. It is worth examining whether it signifies a “global public good” concept and further achieves win-win objectives. At a macro level, this Chapter addresses whether the BRI strikes a balance between China’s ambitious national goals and its international obligations. At a micro-level, the Chapter explores rigorously how China deals with cross-border disputes in accordance with international law. The study proceeds in four steps. In the context of reshaping global governance, Section I conceptualises a state capitalism model vis-à-vis the Washington Consensus. This section seeks to address whether the two models could complement each other, since they may become rival models of influence. The Chapter then continues with an application of power transition theory to analyse how China is engaged in global institution-building through creating a new formula of global governance. Section II deals with China’s grand BRI strategy. In addition to the exploration of its rationales, it is argued that the BRI differs substantially from that of the “Marshall Plan”. Section III ascertains whether the establishment of a hybrid global governance regime is dependent on China’s unique characteristics and also whether it is compatible with international law. It remains unclear as to whether an ideologically perceived line is becoming increasingly blurred by the market-driven BRI. It is equally essential to look at the EU Foreign Investment Screening Regulation as well as the response from the Organisation for Economic Cooperation and Development (OECD). Their interaction with the BRI provides more insights in terms of the viability of the initiative. Section IV examines barriers to China’s implementation of its long-standing principles of equality and cooperation for mutual benefits. The emerging multilateral system embedded in the BRI has been challenged by rising popular nationalist sentiments. This section seeks to mitigate inevitable conflicts from multipronged perspectives. The concluding section affirms that the BRI must be based on universally recognised international norms, otherwise it will be difficult for China to project strategic narratives on the international stage. At stake is whether China can overcome the governance challenge while enhancing its own global influence.