China鈥檚 Belt and Road Initiative: What鈥檚 working and what鈥檚 not
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Ann Scott Tyson Staff writer
| Beijing
Chinese leader Xi Jinping this week launched a new phase of China鈥檚 massive global infrastructure and development program, the Belt and Road Initiative (BRI), aimed at strengthening the country鈥檚 economic integration and influence with the rest of the world.
With an estimated $1 trillion in investments over the past 10 years, the initiative has focused heavily on big projects by Chinese state-owned firms to construct a network of railways, roads, ports, power grids, and pipelines across Asia, Europe, Africa, and Latin America. Going forward, the initiative will shift to smaller, greener, and digital projects by commercial firms, a pivot that Mr. Xi called 鈥渁 new stage of higher-quality and higher-level development.鈥�
Speaking on a vast stage at the Belt and Road Forum before dozens of world leaders assembled in Beijing鈥檚 Great Hall of the People on Wednesday, Mr. Xi called for building 鈥渁 new platform for international economic cooperation鈥� among the more than 150 nations that have signed BRI agreements with China.聽
Why We Wrote This
A story focused onTen years ago, China launched a massive global infrastructure push, establishing an alternative to Western development models. As the Belt and Road Initiative enters a 鈥渘ew stage,鈥� has it delivered on its promises of mutual prosperity?
鈥淐hina can only do well when the world is doing well. When China does well, the world will get even better,鈥� he said, adding that China is a main trading partner with more than 140 countries.
Mr. Xi first announced plans to build new intercontinental land and maritime linkages in 2013, describing them as the revival of ancient Silk Road trade routes. The initiative has won support from many countries since. It is especially popular in the Global South, where billions still lack basic infrastructure systems for drinking water, electricity, roads, schools, and internet. Now entering its second decade, the initiative also faces serious challenges, including rising debt among participating countries, China鈥檚 own groggy economy, and, recently, signs of regional competition. But after this week鈥檚 celebratory summit, analysts say the initiative is moving forward, as is China鈥檚 ability to shape the global development agenda.
The BRI was 鈥渧ery much based on China鈥檚 experience of infrastructure-led growth,鈥� says Christoph Nedopil Wang, director of the Griffith Asia Institute and a professor at Griffith University in Australia. Basically, if you build a road, prosperity will follow.
鈥淭his is a strong view of the Belt and Road Initiative, to really copy China鈥檚 model internationally,鈥� and to establish the initiative as a China-led alternative to Western development models, he says. Although China is adjusting that strategy in the initiative鈥檚 new phase, Dr. Nedopil Wang considers the first decade an overall success.聽
鈥淭he BRI has increased China鈥檚 credibility to deliver projects,鈥� in part by branding much of China鈥檚 overseas economic engagement with the BRI label, he says.
Weighing the debt burden
The world will face a $15 trillion gap between projected and needed global infrastructure by 2040, according to the Global Infrastructure Hub.
鈥淭ogether, with the contributions of the Belt and Road Initiative, we can turn the infrastructure emergency into an infrastructure opportunity鈥� and 鈥渟upercharge the implementation of the [United Nations] sustainable development goals,鈥� U.N. Secretary-General Ant贸nio Guterres told the Beijing forum on Wednesday.
Indeed, many countries remain eager for China鈥檚 help in fast-tracking development.
As he waits to hear Mr. Xi鈥檚 speech, Nepal鈥檚 ambassador to China, Bishnu Pukar Shrestha, says his country wants Beijing to help build a railway between Shigatse, Tibet, and Kathmandu. 鈥淲e need big projects; we need connectivity,鈥� he says. 鈥淚t鈥檚 not more than 100 kilometers [62 miles] on the Nepal side, so they can do this; they can grant us,鈥� he says.
But initiative infrastructure projects have also relied on debt financing, adding to the debt burden of developing nations, as China has emerged as the world鈥檚 biggest bilateral creditor to low- and middle-income nations. Mr. Guterres stressed the need for 鈥渁ctions right now to promote effective debt relief mechanisms.鈥�
Over the past 10 years, some of the countries that received large amounts of finance and investment from China under the initiative include Pakistan, Indonesia, Laos, Malaysia, Bangladesh, Saudi Arabia, and Nigeria.聽
In Pakistan, which has received some $52 billion in construction and investment, the China-Pakistan Economic Corridor (CPEC) has built several major highways covering about 500 miles and also prioritized hydropower and coal-fired power plants.
鈥淲hen this initiative was launched, we were facing severe electricity shortages鈥� and problems with connectivity, says Zafar Uddin Mahmood, the special envoy for CPEC in Beijing from 2014 to 2017. In three years, BRI projects produced nearly 8,000 megawatts of electricity, or 33% of the country鈥檚 total energy requirements, he says. 鈥淲e were able to overcome the shortage of electricity in this short period of time,鈥� says Mr. Mahmood, an assistant to Pakistan鈥檚 prime minister on the BRI from 2022 to 2023.
The large projects added significantly to Pakistan鈥檚 debt problem. 鈥淲e are a heavily indebted country; we have more than $100 billion, and the Chinese are a major part of that, but ... not the entire part,鈥� he says.
鈥淲hen you compare [the debt burden] with the benefits, we don鈥檛 have any major issues,鈥� he says. Chinese interest rates are on average below 3%, he says, and China has been 鈥渧ery generous in rescheduling the debts when we were unable to pay.鈥�
Pakistan is not alone. In Laos, China built a $5.9 billion railway connecting the two countries that opened in December 2021, helping create jobs, fuel trade, and link the landlocked nation of 7 million people to global supply chains. The project is the first leg of China鈥檚 ambitious plan to expand its rail network through Laos, Thailand, and Malaysia to Singapore. But the project has also worsened Laos鈥� debt burden 鈥� in turn, creating problems for Beijing, experts say.
鈥淚f anything, BRI becomes a debt trap for China,鈥� says Zongyuan Zoe Liu, a fellow at the Council on Foreign Relations and author of 鈥淪overeign Funds: How the Communist Party of China Finances Its Global Ambitions.鈥澛�
鈥淚t鈥檚 a problem when foreign sovereigns can no longer pay,鈥� Dr. Liu adds. 鈥淚t鈥檚 a lose-lose situation. ... China on one hand suffers from reputational damage, and delayed payment is the best-case scenario.鈥�
China corrects course
China has begun joining with other foreign creditors to negotiate debt relief 鈥� such as for Zambia this summer 鈥� although Dr. Liu says Beijing prefers to extend the period of repayment rather than engage in debt forgiveness, the latter being known as a 鈥渉aircut.鈥�
Besides adding to debt issues, BRI projects have sparked criticism for having a lack of transparency, contributing to environmental problems, and employing Chinese goods and workers rather than local ones.
On Wednesday, Indonesian President Joko Widodo told the forum that initiative projects should stress giving countries 鈥渁 sense of ownership,鈥� rely on local employment and products, and 鈥渕ust not complicate their fiscal conditions.鈥�
Italy, the only Western European country to have joined the BRI, has indicated it may not renew its participation when its five-year BRI memorandum of understanding with China expires in March next year.
鈥淭rade-wise, it was a disaster for Italy. We didn鈥檛 get anything out of it,鈥� says Alessia Amighini, co-head of the Asia Center and a senior associate research fellow at the Italian Institute for International Political Studies. Italy鈥檚 trade deficit with China grew from $20 billion in 2019 to $48 billion in 2022, she says.
鈥淏RI is very effective for China鈥檚 connectivity with the rest of the world, but it鈥檚 not a win-win game,鈥� says Dr. Amighini, an associate professor of economics at the University of Piemonte Orientale.
Beijing鈥檚 recalibration of the initiative is in part a response to such concerns, experts say.聽
In contrast with big infrastructure projects loaded with debt, the next phase will emphasize smaller-scale business investment with profit potential. Focus areas will include digital connectivity and the transition to renewable energy, an industry where China enjoys a competitive advantage.
China鈥檚 overall BRI investments and construction have declined since a peak in 2018, and the average deal size has fallen by nearly half. It has boosted green energy investment in areas such as solar, wind, and hydropower. Yet China also continues work on new coal-fired power plants overseas, despite a pledge not to do so, according to Dr. Nedopil Wang, the Griffith Asia Institute director.
鈥淭he original BRI relied very much on this debt financing and using Chinese infrastructure firms to build out public infrastructure,鈥� says Dr. Nedopil Wang. China has realized that 鈥渞oads don鈥檛 generate any revenue, particularly in developing countries,鈥� he says, so it is moving toward 鈥渃ommercially viable projects.鈥�
This week鈥檚 forum, which attracted about 10,000 officials, executives, and journalists, included a CEO conference in which some 300 Chinese and foreign business executives signed cooperation contracts worth $97 billion. Ben Okoye, executive vice chair of Brass Fertilizer & Petrochemical of Lagos, Nigeria, holds a freshly signed contract in a shiny red folder for a project connected to a new methanol plant.聽
鈥淭his is the first [BRI] contract for our company,鈥� he says, but it plans to bid for more.聽
