Radical transparency is democracy’s secret weapon to counter China 

Authoritarian regimes, like China, fundamentally depend upon opacity for their engagement with the global economy. Opacity provides the perfect cover for bribes, illicit finance, and corruption, while shielding government officials from public scrutiny over suspect arrangements. As shown in our new report on China’s Belt and Road Initiative,Tightening the Belt or End of the Road?, China’s insistence on comprehensive opacity allowed Chinese and local officials to hide a host of bad decisions, weak planning, poor risk management and corruption. If America and its allies want to get serious about countering China’s economic and political coercion, we need to be committed to leveraging one of democracy’s greatest strengths: transparency. 

China’s trillion-dollar Belt and Road Initiative (BRI), was supposed to unleash infrastructure and investment across emerging markets, building ports and power plants, while building China’s influence across the Global South.  Instead, as a direct result of its comprehensive opacity, the BRI is in trouble across its global footprint. Big-ticket projects with unrealistic cost and revenue projections have led to massive debts in borrowing countries, pushing dozens of nations into debt distress. BRI corruption scandals have erupted across the Initiative and poor-quality builds and poor planning have led to dams with thousands of cracks and schools with faulty foundations.   

Unnecessary projects used to boost local political support proliferated, with airports having more elephants visiting the tarmac than international flights and massive highways primarily seeing foot and bicycle traffic. Not surprisingly, the BRI has failed to deliver a reputational dividend to China, with public opinion of Beijing actually falling in many BRI countries. 

The faltering BRI is being matched by Chinese economic weakness at home — much of it also driven by a “national security” realignment of laws that prioritizes opacity over the ready access to critical business information. Due diligence and Know-Your-Customer standards — key elements of Western business risk management — are increasingly impossible to conduct. Vague new laws and arbitrary enforcement are adding massive uncertainty and risk for stock traders and multinationals — who are increasingly pulling investment out of China. 

China’s weakening economic outlook at home and diminishing economic impact abroad provides an opportunity for the U.S to rethink how to establish global economic engagement built around comprehensive and radical transparency as a precondition for engaging with the U.S. financial system, the American private sector, or to receive any U.S. government funding. To achieve this, America should: 

• Demand transparency in sovereign indebtedness amounts and terms by countries who signed up for massive BRI loans, before engaging in debt restructuring after sovereign default — as we have already seen in BRI countries Sri Lanka and Zambia.   
• Demand transparency of multinational supply chains that depend upon countries, like China, where forced labor and other human rights risks are prevalent.   
• Build transparent e-procurement systems and demand that any country receiving U.S. funding use them.   
• Demand transparency in trade deals with clear rules of origin, to ensure that China and other authoritarian regimes are not benefiting from free trade agreements that were intended to exclude them.   
• Demand transparency from any Chinese company engaged in business in the United States or with U.S. entities to ensure that they are not passing sensitive information on to the Chinese Communist Party, as required by China’s National Intelligence Law. 
• Make clear that the U.S. will prosecute foreign officials who demand bribes from U.S. entities — and encourage other countries to adopt similar measures to curb opaque foreign influence. 

Over the past decades, China has become highly integrated into the global economy, particularly in the supply chains of Western multinationals that still rely on China to source materials and components that are hard to acquire elsewhere. That supply chain dependency, however, is diminishing as global companies increasingly recognize the risks of overreliance on China and, increasingly, pull capital out of its opaque investment environment. Until China allows for greater business transparency, America and its allies must push for greater decoupling. This will both strengthen American resilience to global shocks, like pandemics and wars, while also helping to reengage with countries that support a transparent world economy. 

For countries in emerging markets, the U.S. should not repeat the opaque “no-strings” mistakes of China’s BRI. Instead, we should be building much-needed, high-integrity infrastructure under open and transparent terms and conditions — meeting the needs of the Global South under a framework that supports democracy, allows for citizen oversight, and leverages the advantages of open and fair competition.

Transparency is democracy’s secret weapon. Building economic engagement around radical transparency would defang the corruption, surveillance and secrecy that form the backbone of China’s global development strategy — building a stronger, fairer and more open global economy in its place. China will then face an existential economic choice: evolve or be left behind. 

Elaine Dezenski is senior director and head of the Center on Economic And financial Power at the Foundation for Defense of Democracies. Joshua Birenbaum is deputy director of the Center on Economic and Financial Power at the Foundation for Defense of Democracies.