Road to nowhere? Prospects for the BRI in 2023 and beyond
Road to nowhere? Prospects for the BRI in 2023 and beyond
WRITTEN BY PHILIP LOTT
24 January 2023
The new year marks the tenth anniversary of China’s Belt and Road Initiative (BRI), which was inaugurated in 2013. The BRI was originally envisioned as a solution for a struggling Chinese economy and to address the threefold challenge of industrial overcapacity, low domestic demand, and stagnating exports abroad. At the same time, BRI projects were intended to increase soft and hard connectivity between China and developing countries by creating economic corridors and trade routes between China and Central Asia, Europe, and Africa.
By March 2022, 147 countries had signed Memorandums of Understanding and thereby joined the BRI in some form or another. One of Chinese President Xi Jinping’s signature projects, spending in connection with the BRI has totalled more than USD 932 billion and could reach up to USD 1.3 trillion by 2027. China’s international development spending is now twice that of the US.
However, the BRI has not been without its fair share of controversies and amid the (economic) repercussions of the COVID-19 pandemic for its projects, the trajectory of the BRI is uncertain. With increased competition from the EU and the G7, as well as recent readjustments of the BRI’s scope and spending, one question remains: will China’s “project of a century” be short-lived? 2023 will be a crucial year, not only for taking stock of the BRI’s progress but even more so for staking out its future.
The state of the BRI: between myth and reality
Despite impressive metrics, the BRI has not been without setbacks or criticism. Due to the lack of a “central, public Belt and Road data source”, aspects like financing structures, loan guarantees, or social and environmental impacts have remained opaque. Since 2019, spending on the BRI has decreased significantly. According to a report by Fudan University’s Green Finance and Development Centre (GFDC), BRI-related investment was USD 28.4 billion in the first half of 2022, compared to 29.4 billion during the same timeframe in the previous year. Compared to the same period in 2019, there was even a decrease of 40 per cent in spending.
In Africa — one of the focal points of the BRI — Chinese loans were down 77 per cent from 2019 to 2020. Additionally, the size of individual BRI deals is 21 per cent smaller than in 2015. Overall, a return to 2019 spending levels is seen as “unlikely” due to a shift in macroeconomic conditions in China, as well as in the host countries. While the COVID-19 pandemic and its repercussions have been a “major complication” for the BRI, and the main reason for decreasing funding, they have also laid bare inherent flaws that transcend the temporary setbacks, such as the lack of accountability and wastefulness.
With increased competition from the EU and the G7, as well as recent readjustments of the Belt and Road Initiative’s scope and spending, one question remains: will China’s “project of a century” be short-lived?
Existing projects face an array of complications with 35 per cent of BRI projects suffering from some form of “implementation challenge”. Additionally, an increasing number of projects are being cancelled, indicating “buyer’s remorse” on the part of the host countries. The reasons for this include corruption scandals, the violation of labour rights, and the breach of environmental protection regulations.
Furthermore, local governments and populations have developed a certain aversion to the BRI in recent years with political and public pushback slowing, or obstructing, the progress of projects, contributing to a lack of demand in host countries. Accusations that the BRI functions as a debt trap to take over local infrastructure have been the most prominent in the public debate — however, they remain controversial. While the fear of increasing Chinese influence has shaped public opinion on the BRI, evidence of debt traps is scarce and the debt trap narrative has been debunked in some specific cases.
Amid the cancellation of several “big ticket” projects in countries as diverse as Bolivia, Kenya, and Malaysia, as well as the continuing problems of the BRI’s largest project, the China-Pakistan Economic Corridor, the Chinese leadership has started acknowledging the issues and has been signalling a revision of the BRI’s strategic orientation with an emphasis on growth and standard-setting, as well as prioritising Southeast Asia.
Redrawing or withdrawing?
On the one hand, the “longer-term prognosis” for the BRI will depend on the aftermath of China’s zero-Covid strategy and its success in handling the remnants of the COVID-19 pandemic while ‘re-opening’. On the other hand, there has been a significant readjustment in China’s BRI strategy. In Africa, China aims to reduce risk by favouring private-sector initiatives over state-owned enterprises. In Central Asia, China has abandoned large infrastructure projects and is focusing on measures that aim to industrialise Central Asian economies.
Moreover, the BRI has all but disappeared from official statements and speeches by the Chinese leadership. Throughout 2022, Xi Jinping limited mention of the BRI to the platitude of “advancing high-quality Belt and Road cooperation” in his most important speeches, as some observers have pointed out. Additionally, Xi delegated responsibility for the Belt and Road Forum to then-Foreign Minister Wang Yi. While this meeting of leaders from BRI-affiliated countries used to be a priority for Xi, it has now disappeared from his agenda.
Nonetheless, the Chinese leadership is reluctant to fully abandon the BRI, aiming to reframe and transform the initiative instead. Instead of the BRI, the Chinese leadership is continuing the narrative of ‘developing the world’ through two new initiatives: the Global Development Initiative (GDI), put forward in September 2021, and the Global Security Initiative (GSI), announced in April 2022. Both initiatives are mentioned explicitly in the foreign policy section of the draft Party Congress report, while the BRI has been omitted. Wang Yi has described the GDI and the BRI as “twin engines” and the Chinese leadership has denied that they intend to replace the BRI. However, these developments indicate that the BRI has been “relegated to a lower place in China’s foreign policy hierarchy”.
You can't compete where you don't compare
Despite these challenges, China will not be replaced as the “main funder” of development and infrastructure projects in countries along the Belt and Road anytime soon. However, China’s adjustments to the BRI in combination with negative sentiments among some countries have opened a window of opportunity for other actors. Montenegro recently restructured a loan from the Export-Import Bank of China (EXIM) with the help of European and US banks after indebtedness to China had become a contentious topic. Similarly, Ecuador turned to the US International Development Finance Corporation (DFC) to fund a railway project after delays with EXIM.
While connectivity initiatives already exist in the US and Europe, the changing geopolitical landscape has given rise to more strategic endeavours. The EU’s Global Gateway intends to invest EUR 300 billion by 2027 and puts democratic values at the centre of its initiative. Regionally, the EU’s initiative puts an emphasis on the African continent and aims to engage governments in the region more broadly. The G7’s Partnership for Global Infrastructure and Investment — building on the US-led Build Back Better World (B3W) initiative — is supposed to contribute USD 600 billion in investments by 2027 for infrastructure in, and support for, developing nations.
The Global Gateway and the G7 initiative are often framed as competition and a counteroffer to the BRI. Upon their launch, these initiatives “prompted questions” about the future of China’s BRI and the prospects for China’s influence in developing economies. However, European and US funding is unlikely to displace Chinese investments but will instead be a welcome addition — especially as “large developing countries like Nigeria and Indonesia rely on diverse sources of finance”. Indeed, some observers have noted a “space for cooperation” between the initiatives, even though differing perspectives on environmental standards and the use of forced labour might present unsurmountable barriers.
Amid the effects of the COVID-19 pandemic and the surge of Western development initiatives, it was only a question of time before China adjusted its ambitions for the BRI — however, there is life in the 10-year-old ‘dog’ yet. From the perspective of developing economies, the new initiatives mean more offers and potentially better deals. Therefore, a competition of narratives could translate into a wider range of funding options, with developing economies set to profit in the coming years. If these initiatives emerge as a system of checks and balances in the area of development and infrastructure financing, China’s BRI — but also its Western competition — will have to be more receptive to local and regional needs.
DISCLAIMER: All views expressed are those of the writer and do not necessarily represent that of the 9DASHLINE.com platform.
Author biography
Philip Lott is a Program Officer at the Aspen Institute Germany. His primary research interests are emerging security challenges in the transatlantic and Indo-Pacific contexts, including energy and climate security, and digital governance. He is also an assistant editor at 9DASHLINE. He writes in a personal capacity. Image credit: Wikimedia.