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Vol 3, No 1. March 30,2019


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Belt and Road
(and sea)

Watching China Move


Something is happening here, and you (probably) don’t know what it is.  You might follow the news faithfully, but the story isn’t really to be found there.  Or rather, if it is told at all, it is often told in connection with the “demon” China and its financial woes.

This Bulletin is about the Chinese Belt and Road (and sea).  (Sometimes called One Belt, One Road or BRI)

  • The initiative reflects a massive investment (more than trillion of dollars worth over an extended period) spearheaded by China with participation from lots of others.  It includes:  a multitude of memoranda of understanding, free trade agreements, cooperation agreements and even cultural exchanges plus many major and minor infrastructure projects. 
  • The original intent of Belt and Road (and sea) was to establish six “economic corridors” along with fifty special economic zones. As is common with huge pots of state money allocated for development, there is some divergence between plan and action, in this case with many projects outside the corridors and even some already pre-existing projects receiving funding. 

The Belt and Road (and sea) initiative in a nutshell:

Almost 200 agreements have been signed with countries involved directly or indirectly involved in Belt and Road (and sea).  They encompass one third of the world’s population!

  • The infrastructure projects include major roads, high speed rail, sea routes, ports, pipelines, power stations, transportation hubs and refineries.
  • Commentators have called Belt and Road (and sea) the “Chinese Marshall Plan”.  The rhetoric (moving countries from underdevelopment and political crisis to development and peace) is familiar. The focus of Belt and Road (and sea) is indeed mainly on “emerging” (i.e. poor) countries.  Belt and Road (and sea) dwarfs the Marshall Plan by a factor of 7.
  • However, at least one of the economic corridors is in place (through Pakistan). Many major infrastructure projects consistent with the original conception of Belt and Road (and sea) are completed, such as the dry port in Kazakhstan. 
  • How many projects, where, and to what end is still a bit of a mystery to us.  Most reports we found are based on the public statements by Chinese officials, on investment promotions by major banks, on analyses by agencies with connections to Western countries and from the Chinese and often hostile non-Chinese press.   
  • We have the lists of formal agreements between states, many maps with lines and dots showing roughly where Belt and Road (and sea) initiatives are located. We can find no list of projects or project schedules. We know that China is actively seeking northern and southern polar routes, but this is not mentioned in Belt and Road (and sea) discussions.
  • Taken together, when and if completed, Belt and Road (and sea) infrastructure projects will constitute a network of facilities to support new trade routes  (to Europe, Asia and south Asia, Africa and Latin America) and new access to resources and markets other than the US.   Even now, it serves distinct purposes for the Chinese economy (see below).  It is also a geo-political initiative, a strategy for building a network of influence (for security as well as political reasons) throughout much of the world.

How and why financed:

Belt and Road (and sea) began as Chinese state investment, but the intention is that it will not remain mainly that.  Many Thousands of Chinese private firms have been involved; much investment comes from a new Asian Infrastructure Development Bank (approaching 100 participating countries including western ones, though China is by far the biggest voting shareholder).   The World Bank and IMF have been players in some projects.  Many major banks (including Canadian ones) have been aggressively selling investment opportunities.

  • Most importantly, from a political if not an investment point of view, local investments actively pursued from the countries where projects are located.  No information is available on how successful this has been.
  • Much, but not all of the foreign investment is in the form of loans not aid - loans with upper-end interest rates.

The Strategy:

Belt and Road (and sea) is a loose network.

  • No two projects are exactly alike and they are independent of each other.  This is because, in large measure, the projects engage local states and partners and abide by their standards, predilections, ambitions, governance and capacities. Even so, Belt and Road (and sea) constitutes the kind of initiative only an autocratic (and very wealthy) state could do.


Local economic development are considered essential, reflecting a postulate of economic theory – infrastructure investment pays off in other kinds of economic growth both for the investors and for the countries where the projects are located. Such development is said to eventually undercut inequalities, build indigenous middle classes, create new consumers and promote inter- and intra-country stability.  Belt and Road (and sea) takes as its primary assumption that local, governance regulation and standards will rule. 


Already as a land route, Belt and Road (and sea) has knocked almost half the time needed to get goods from China to Europe (and vice versa) without going through the Suez Canal. 

  • One report says 380 of Chinese-funded projects can be identified as Belt and Road (and sea), although this includes a wide variety of initiatives, some fairly minor.   Many projects are completed or nearing completion, an amazing feat given that the Belt and Road (and sea) was first announced in 2013.


In these times, it should not be surprising when a country (or city, for that matter) rejects the project that is proposed for its location. 

  • The number of such rejections is hard to judge, but the rejections are well covered in the press.  In the Belt and Road (and sea) case, the reason for rejecting projects is said to be the potential for massive debt obligations that come with the investment loans.  Debt forgiveness is possible, but seemingly only with turning over some portion of ownership of a public asset (airport or whatever) to the Chinese.  
  • Local politics can play a major role. For example, a ruler/government might well endorse participation in a Belt and Road (and sea) project, only to find opponents advocating rejection.  When and if regimes change, already approved Belt and Road (and sea) projects are cast aside (e.g. Sierra Leone). Most of the infrastructure projects are located in autocratic countries.


The burden of debt being assumed by the countries is huge: China argues in response that other local economic developments will follow, creating more than enough wealth to make payments in the future.  The refineries will earn their keep; real estate will bloom, those newly employed in project related jobs will create a tax base etc.  In some cases, this is a reasonable assumption; in many cases it is not.  But who knows whether infrastructure investment (“build it and they will come”) is actually a road to economic development, and if so, to what extent.

  • Corruption in high places in the countries where projects are located could certainly undermine projects’ potential to create local economic development.  The proposed projects simply might not be built or else the benefits of completed projects could be drained away.   This is true for World Bank and IMF projects as well, of course.
  • Local governance in project locations is often weak or corrupt, and the prerequisites for project completion are often different from Chinese ones.  Dealing with the differences is something that each project must come to terms with, and some projects do better than others.  
  • Coordination is a major issue, particularly where two or more countries are involved in a single project. Belt and Road (and sea) is undoubtedly a top-down strategy, but its implementation demands a lot from the bottom up.
  • Whether these hurdles will make it necessary for the Chinese state to step in and feel it necessary impose some sort of more traditional “colonial” administration remains to be seen.  Or China will simply walk away from troublesome projects or unwelcomed proposals, and seek alternatives elsewhere. Or Belt and Road (and sea) initiative will amount to much less than its initiators claim.

As we see it: economic development (for China):

  • What the projects do for China is provide a vehicle to soak up “over-saving” in China.
  • They soak up Chinese unemployment too, because much of the labour, especially highly skilled or construction labour, is done under contract with Chinese companies.
  • The Belt and Road (and sea) initiative has propelled the development of major economic centres in Western China, an area that has seen separatist sentiment.  High tech development is crucial in these new centres.  They provide a workforce that can sustain Belt and Road (and sea) and Chinese growth more generally.  
  • Belt and Road (and sea) is intended to create new markets, routes and destinations for trade, routes and destination that are not dependent upon the US or traditional US-controlled access.
  • Not surprisingly, Chinese investments (companies, partnerships, mergers, acquisitions etc.) in the USA have fallen dramatically in the USA (42% down in 2017, and likely much lower in 2019).   Chinese companies have been encouraged (including by new Chinese regulations/restrictions) to redirect their ventures away from real estate and such ventures.  Belt and Road (and sea) infrastructure projects provide opportunities.
  • Meanwhile, unlike the US, China is still actively engaged in signing and supporting multilateral trade alliances. It has signed bilateral trade treaties with the at least 80 countries, as well as actively participating in trade alliances that reach well beyond  these Chinese-only initiatives.
  • Historically, lending to “emerging” countries has been denominated in in US currency.  China has created investment banks to issue bonds (and other forms of debt) for local or non-Chinese investment in various projects.  These bonds are denominated in Chinese currency, a strategy for making Chinese currency an increasingly viable alternative vehicle to the US dollar.

As we see it: politics and “security”:
A friend in need is a friend indeed.  The participating “emerging economy” countries are, for the most part, friends in need.

  • In and of itself, Belt and Road (and sea) is about networks of influence, not control.
  • Not only are “emerging” countries (such as, for example, Vietnam, Cambodia Kenya) and former Soviet countries in Eastern Europe ( e.g. Latvia, Croatia, Georgia, Poland, Romania) willing
  • partners, but a rough sort of partnership is developing between Russia and China through Belt and Road (and sea).
  • There are indications that military and security related activities are connected with some of the projects.  Cyberspace connectivity is part of the plan, for example.
  • Chinese environmental initiatives are mainly directed elsewhere.  They are, in their own right, not insignificant but their connection to Belt and Road (and sea) is at least partly rhetorical.  Pipelines and refineries for fossil fuels are among Belt and Road (and sea) projects.
  • If Belt and Road (and sea) is properly called colonialism, it is different sort of colonialism from old style colonialism and even neo-colonialism. The Chinese vigorously deny it is any form of colonialism, stressing the independence of the projects and of countries that need for foreign investment from any source for development.
  • The USA has long taken it for granted that it can establish bases, invest, influence and even exert control in Asia, Africa, the Caribbean and Latin America  countries both directly, and through transnational companies, and through existing institutions like the World Bank and IMF.. For decades, America’s military bases and security alliances solidified US reach.   Under President Trump, in 2018, the US has  stressed its Asia strategy by consolidating two existing programs (with existing funding) into one, the BUILD Act.  The goal is to support private investors, not state to state investment. The funds available for BUILD are very small proportion of Belt and Road (and sea). BUILD plus sanctions and tariffs are intended to counter the Chinese Belt and Road (and sea) initiatives.  

In short, not a chance.

In conclusion:

To the extent you do hear of it, Belt and Road (and sea) is said to be a good example of Chinese economic foolhardiness. It is said to be Chinese-style neocolonialism. It is said to be the Chinese way to put third world countries into permanent debtor obligation or to resolve their debts by taking ownership of indigenous public assets.

  • In other words, Belt and Road (and sea) is used to portray China as demonic.  
  • And with the Chinese economy no longer enjoying its phenomenal growth spurt, the presumption is that Belt and Road (and sea) is in deep trouble too.   
  • It is hard to judge Belt and Road (and sea) financing problems from pro-western sources. Chinese sources are notoriously rhetorical. The situation is changing almost daily, and the business press seems bound to whatever negative stories are being propounded each day.
  • Even with its problems, however, China’s growth rate is something many other countries can only dream about.  And even if only half of the projects materialize, Belt and Road (and sea) is massive.
  • Whatever its failings (and atrocities) China is neither monolithic nor demonic.



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