Ten years after its inception, the Belt and Road Initiative (BRI) has evolved from a Eurasian trade corridor and infrastructure investment program to an all-encompassing Chinese initiative, with various foreign policy, economic, and geopolitical objectives all being pursued under the banner of the BRI. If there was any doubt regarding the centrality of the BRI to the Chinese Communist Party’s strategic vision of China, that was dispelled when the party incorporated it into the CCP constitution in 2017, formalizing its commitment to the BRI. As of August 2023, 155 countries have already signed up to the BRI, including countries from Africa, Oceania, and Latin America, representing almost 75% of the world’s population and accounting for more than half of the world’s GDP. Data from the China Global Investment Tracker (CGIT), published by the American Enterprise Institute tracked $564 billion in Chinese funding for construction and BRI-related projects from 2013 to 2023.
What drives the BRI? Nadège Rolland from the National Bureau of Asian Research argues that, primarily, it is designed to sustain China’s economic growth by expanding access to new markets and growing its economic sphere of influence abroad. With excess industrial capacity and fewer profitable investment opportunities at home, Chinese state-owned enterprises (SOEs) step in as contractors for BRI projects. Another important driver of the BRI is Beijing’s goal of closing the development gap between the rich coastal regions and the under-developed landlocked provinces in the West, which aims to maintain domestic stability and regime security through economic prosperity. From a strategic perspective, the BRI also strengthens China’s energy security by establishing alternative land-based routes that circumvent the US-dominated sea lanes in the Indo-Pacific , particularly the Malacca Strait.
Patterns and Criticisms
However, despite the economic opportunities promised by BRI projects, plenty of criticisms abound. One illuminating example is Montenegro’s A-1 Motorway. This BRI project, agreed upon in 2014, built a 40-km highway that is described by former Montenegrin Justice Minister Dragan Soc as “a highway from nothing to nothing”. The total cost was $1 billion, an amount that significantly raised the debt burden of Montenegro’s $5.86 billion economy as of 2021, the year the highway opened. Critics argue that aside from the massive costs, the highway does not make economic sense as it leads to nowhere; without enough road users, the toll collections simply cannot pay for the construction costs. Due to lack of transparency and weak governance standards, as are usually alleged against BRI undertakings, the project was plagued with allegations of massive corruption. Adding insult to injury, Chinese contractors brought in up to 70% of the workforce and materials needed for the construction, depriving the Montenegrin economy of the much-needed boost in spending. Even setting aside the sustainability of a debt-financed infrastructure model, participant states in the BRI do not fully reap the benefits of big-ticket projects; instead, Chinese SOEs and workers end up benefiting from the BRI-financed projects in developing countries.
Economic headwinds
Research by economists Horn, Reinhart and Trebesch shows that almost 60% of China’s overseas loans are now owed by countries in financial distress. At the same time, China’s troubles at home are getting worse every day: the economic fallout from the pandemic, the impending collapse of the real estate bubble, the exodus of foreign capital, spiking unemployment, deflation, slowdown of household consumption, and a rapidly aging population. Against this backdrop, the economy is on a clear downward trend and surplus funds are drying up fast. Even if Beijing is theoretically willing to refinance other countries’ BRI loans, it might not be able to. Even before the pandemic, China’s lending had been on a downward trend, shifting to a more prudent stance as bad loans mount.
China’s economic woes are also partly attributable to its foreign policy miscalculations. Its aggressive rhetoric during the pandemic and dismissal of others’ criticisms have sparked geopolitical tensions with its Asian neighbors and the West. The ongoing rivalry between the US and China, coupled with concerns over the latter’s growing military assertiveness on the global stage, has led some countries to reconsider ties with China. The recent withdrawal of some nations (e.g. Italy and the Philippines) from the BRI exemplifies this growing skepticism about the benefits of participating. Furthermore, the CCP’s zero-Covid policy disrupted global supply chains and prompted the “decoupling” and “de-risking” of many companies.
Finally, the Chinese people are waking up to the reality of a declining economy. Faced with simultaneous crises, they are now questioning the rationale behind spending lavishly on foreign projects while the people are forced to survive on their own without government aid. This matters because public discontent can energize opposing factions within the CCP to make a move against the ruling regime.
Xi’s Litmus Test
While the BRI is not without criticisms, the narrative of its decline must nevertheless be approached with nuance. Xi Jinping has made the Belt and Road Initiative his signature policy and his legacy. However, as the Chinese economy weakens, Xi is confronted with the dilemma between continuing to spend billions on the BRI or focusing its energies and resources inwards. The BRI is an era-defining and ambitious global project that the current regime has every incentive to keep alive, if only because Xi’s name is inextricably linked to the fate of this undertaking. As participating nations reevaluate their positions, the true test of the BRI’s resilience lies in its ability to adapt and address the genuine concerns and criticisms raised by the international community. Is Beijing willing to go beyond being just a creditor to being a genuine partner?
Written by Shai Rabi, Edited by Maryam Sindi
Photo Credit: Unsplash
