Australia pulls out of BRI pact with China; move seen as 'loss of face' for Xi Jinping

Australia scrapped the controversial Belt and Road (BRI) agreement with China claiming the deal was contrary to the national interest. Lately, it appears China's Xi Jinping has witnessed a cold shoulder while countries across the globe either cleared their stance or strengthened their relations with one of the world's largest trading resource.

Australia's PM Scott Morrison eliminated the agreement signed between the State government of Victoria and the National Development and Reform Commission of China, which was signed on October 8, 2018, last month. Australian Federal government even terminated a framework agreement signed on October 23, 2019. 

Australian Foreign Minister Marise Payne said that the BRI deal has been cancelled owing to a new foreign veto under Commonwealth laws. As DW reported, this termination might mean an end to further Sino-Australian cooperation in the fields of industrial production, biotechnology and agriculture. 

Heribert Dieter from German Institute for International and Security Affairs (SWP) said that the revocation is an "extremely difficult loss of face" for China and that Canberra's relations with Beijing are worsening. Dieter further marked that the Australian government's decision to cancel the agreement could further prompt delays or pullouts by other countries involved in the China-coined BRI project. The BRI initiative had lost its momentum owing to the COVID-19 pandemic as China's counterparties have been facing economic turmoil respectively. Dieter said, 

"The pandemic is extremely inconvenient for China. Many countries are experiencing great economic troubles.. China will either have to extend the terms of loans or generally put projects on the back burner for the time being."

Study on Chinese contracts

In accordance to a study by Georgetown University, USA and by the Kiel Insitute for the World Economy (IfW), Chinese contracts "contain unusual confidentiality clauses that prohibit borrowers from disclosing the terms or even the existence of the debt". The study also found that the "cancellation, acceleration and stabilisation clauses in Chinese contracts potentially allow the lenders to influence the debtor's domestic and foreign policies. 

Few countries fear the lending the Belt and Road Initiative entails could lead to unsustainable debt levels in a developing nation. Dieter further hinted on 'corruption' bound several deals as opaque contracts have become a standard for BRI initiatives. He added,

"It would be a severe blow to the Chinese narrative to find that not only Australia, which is comparatively small in terms of population, but also larger players are saying goodbye to the Belt and Road Initiative and thus to the prospect of closer cooperation with the People's Republic of China. 

China's Reaction 

China's reaction to Australia's cancellation decision was rather sharp. They said that the move by the State of Victoria is category categorised as "negative moves" and it had soured bilateral relations. According to South China Post, China's top diplomat Cheng Jingye blamed Australia for deteriorating ties between the nations, accusing it of economic coercion and "provocations" in a widely ranged speech that obviously painted Beijing as a victim. 

Relations between Australia and its largest trading partner have been in freefall since April last year after Canberra provoked Beijing by proposing an independent probe into the origins of the COVID-19 contagion of the virus. Beijing has since inflicted a range of trade reprisals, including imposing crippling tariffs on Australian barley and wine while blocking coal shipments. 

Soured relations between EU & China 

In a recent development, the EU pledged to block the EU- China investment deal while dozens of Brussels lawmakers denounced China's attempts to "gag" European critics via sanctions. The EU's take on China has hardened over a period. According to South China Morning Post, at a debate in the European Parliament more than 30 members took the floor to condemn the sanctions imposed by Beijing last month. They denounced the sanctions and targeted a host of elected officials, ambassadors, academics and think tanks. 

The EU reiterated their serious concerns regarding human rights issues in China including alleged forced labour camps and a crackdown in Hong Kong against anti-government protestors and the persecution of the Uyghur minority in the province of Xinjiang. Denouncing the retaliatory sanctions, the MEPs slammed Chinese attempts to "interfere in the democratic life of our nations and our European Union". 

Mikko Huotari, the director of the MERICS China think tank in Berlin told DW, 

"There is already a danger that the German government, in the last few months of Merkel's chancellorship will remain wedded to a course in its China policy that fails to recognise that the wind has also changed in many other EU member States."

Soured relations between China & its neighbouring countries

Disputes over the South China Sea, have compelled several foreign entities to outpour their opinions and inculpate China. In a recent development, international public opinion raised concern over the domineering Coast Guard Law of China stating that Beijing uses the law to legalise violence caused by its coast guard forces in order to serve the country's unilateral sovereignty claim in the East Sea alias South China Sea. 

China has been more assertive in sovereignty disputes of the Spratly Islands in the South China Sea. The said islands are subject to a territorial dispute and are in whole or partly claimed by numerous countries, namely, Brunei, China, Malaysia, Philippines, Taiwan and Vietnam. China claims virtually all of the South China Sea while the Philippines claim the Spratly Islands as being within its exclusive economic zone alias West Philippines. A United Nations tribunal dismissed China's claim to virtually claiming all sovereignty of the South China Sea. Earlier, Beijing had rejected this ruling.