When President Xi Jinping called the Belt and Road project the “project for the century” when he first assembled world leaders in 2017 to map his vision of expanding Chinese softpower via a web infrastructure investment.
The future of the Chinese stateman’s Belt and Road initiative is uncertain as he opens the third Belt and Road Forum in Beijing this week. While the project has drawn $1 trillion over its first decade. However, momentum has slowed in recent years. Signed Belt and Road Agreements with China by other countries and territories
China’s total activity in BRI-countries is down by about 40% from the peak it reached in 2018, as the second largest economy of the world slows. Beijing is accused of being a reckless lender that drives countries into default. As a result of deteriorating ties with the US, association with Xi’s pet project has become increasingly divisive. Italy, the only member of the Group of Seven, will leave before the end of the year.
A Chinese official believed the BRI was dead. Covid’s problems and China’s economic woes were two factors that contributed to this conclusion. The official who requested anonymity to discuss a sensitive subject said that the government was hoping this summit marking BRI’s 10-year anniversary would reinvigorate it.
According to a senior American who declined to be named to discuss private discussions, the US believes that the BRI has serious problems. Beijing is less willing to lend money and the pressure to recover the money it lent has increased, according to the official.
Xi has the opportunity to respond to his critics this week when a number of leaders from the Global South arrive to show their support for the program, and to test Beijing’s willingness to make new deals. The Russian President Vladimir Putin is the most notable. Viktor Orban of Hungary, Indonesian president Joko Widodo and Alberto Fernandez, President of Argentina, will also be attending.
Alfred Wu, associate professor at National University of Singapore’s Lee Kuan Yew Public Policy School, said that Xi would invite his closest friends to come together and celebrate. It’s clear that China wants to be its own ally while also challenging the US-led global order.
Covid’s outbreak halted China’s trade and infrastructure initiative as the global economic slowdown threatened debtors ability to repay loans. Zambia became the first African nation to default on its debts during the pandemic of late 2020. This put China, Zambia’s largest lender in the spotlight.
According to a report from the Green Finance and Development Center of Shanghai’s Fudan University, the BRI engagement fell to $63.7 billion during the first year following the global health crisis. This is down from more than $120 Billion in 2018.
The geopolitical tensions in China and the domestic economic problems that plague it are not likely to abate.
Michael Kugelman is the director of the South Asia Institute, at the Wilson Center. He said that external shocks such as the war in Ukraine and the war in the Middle East in the next few weeks could increase debt and inflation burdens.
China’s response has been to focus on “small but beautiful projects” that improve the livelihoods of people. This month, the state-run People’s Daily cited a water treatment plant upgraded by a Chinese company and a technology collaboration with a seed firm in Costa Rica as example.
According to the Fudan Report, the average BRI deal dropped by 48% in 2018 to $392 million. The report looks at both construction projects funded by China and those in which Chinese companies hold equity stakes.
China’s private companies are also becoming more active in a space once dominated by policy banks and state-owned companies, said Christoph Nedopil Wang of the Griffith Asia Institute who wrote the Fudan Study.
This has led to some large investments that are focused more on building global markets than infrastructure. Mercedes-Benz Group AG and Contemporary Amperex Technology Co. from China, for instance, plan to invest over $7 billion into a factory in Hungary. This is the largest single investment in a BRI nation since 2013.
The Belt and Road Initiative has been a loosely defined initiative, and the term is often used to describe any project in countries with friendly relations to China.
According to the Fudan study, the geographical focus of the strategy has evolved along with Xi’s foreign policy. According to the Fudan Study, Saudi Arabia ranked third in terms of BRI loans this year as the Chinese leader aims to expand his influence throughout the Middle East.
Italy continues to question whether Xi’s flagship initiative will bring any economic benefits.
Guido Crosetto, the Italian Defense Minister said in July that “we have exported a lot of oranges to China. They have tripled their imports into Italy in three year.” Paris, at that time, sold planes for tens or hundreds of billions without signing any agreements.
Italy has signed a BRI agreement in 2019 and its imports of China have increased, but this increase was not reciprocated. Italy’s exports to China grew only 5% last year, trailing behind Germany and France, two countries not part of the BRI.
Orban, the Hungarian prime minister, said that after meeting Li Qiang, Premier of China on Monday his country was looking to increase cooperation with China. Orban stated that Hungary is aiming to boost economic cooperation with China, rather than forming blocs or shutting them out.
China’s Foreign Ministry did not announce plans for a roundtable of leaders that Xi had hosted at two previous events. The summit is expected to draw a smaller number of world leaders.
Xi has helped Global South countries by presenting his country as a world leader in the development sector. According to a report from Boston University, China provided $114 billion of development funding to Africa between 2013 and 2021.
The US and European governments expanded their engagement with certain developing nations in order to counter China’s growing influence. While Western rivals have pledged millions of dollars, their projects are slow to take off.
This week, China’s credit line will be put to the test when William Ruto, Kenya’s leader is expected ask for $1 billion in order to finance infrastructure projects that have been stalled. Wu Peng is the department director for African Affairs at China’s Foreign Ministry. He said that a “big” loan will be announced in the near future to finance a new rail project in Africa.
This won’t reverse the trend towards a smaller BRI but it may show Xi’s continued commitment to this program as a cornerstone of his foreign policies.
Raffaello Panucci, a senior Fellow at the S. Rajaratnam School of International Studies, in Singapore, says that Xi’s influence will ensure BRI doesn’t fade.
Pantucci stated that “Xi’s association with it means it will remain an important thing and relevant for as long as he remains in power.” It was “too rapid at the start anyway.”