On the 10^th anniversary of the BRI, we look at 10 key figures that demonstrate the scale and ambition of the project.

155
As of August 2023, a purported 155 countries have joined the BRI by signing a memorandum of understanding (MoU). According to the Chinese government’s Belt and Road Portal, this includes 40 countries in Asia, 52 countries in Africa, 27 in Europe, 15 in North America, 9 in South America, and 12 in Oceania.

1
Italy is the only G7 country to have joined the BRI, having signed an MoU with Beijing in March 2019. However, as of late 2023, the Italian government has indicated that it is likely to withdraw from the BRI, bringing it into step with the China policy of the rest of the EU. Italian politicians are reported to have been disappointed with the scale of trade and other business dealings with China since the MoU was signed.

$1 trillion
The amount estimated to have been spent on BRI initiatives, making the BRI the largest multilateral development project ever undertaken by a single country.

3,000
The number of major projects estimated to have been undertaken as part of the BRI. This includes roads, railways, ports, power plants and other critical infrastructure.

40%
The proportion of projects in the China-Pakistan Economic Corridor – one of the BRI’s flagship arrangements – estimated to have run into problems such as funding cuts, corruption, or insurmountable cost increases. Some have criticised BRI projects for a lack of follow-through, leaving countries with infrastructure projects and economic zones that ultimately do not contribute to the economy. A report by AidData at William & Mary suggests that around a third of the BRI infrastructure project portfolio has encountered major impediments.

120km per hour
The speed of the trains on the China-Europe Railway Express project, a logistics distribution network that connects China with more than 200 cities in 25 European countries via the Eurasian hinterland.

36 gigawatts
The estimated capacity of the coal power plant projects that have been cancelled since 2021 after Xi Jinping announced that China would no longer support the construction of coal-fired power plants abroad. Since then, China has stated its commitment to supporting green and low-carbon energy development in BRI countries.

13,000km
The length of the Yiwu-Madrid railway line, the world’s longest railway freight route (the Yiwu-London route is the second longest). The route is one of several used by long-distance trains as part of the “New Eurasian Land Bridge”, which is integrated with the BRI.  The journey takes around three weeks, as opposed to six by sea. Despite the success of China-Europe rail projects over the past decade, most analysts agree that the maritime routes of the BRI still receive the most focus/trade.

99 years
The length of time that the Hambantota International Port in Sri Lanka has been leased to China. China Merchants Port took a 70% stake in the port in 2017 after the Sri Lankan government struggled with debt repayments (the construction of the port had been financed with commercial loans from the Exim Bank of China). Hambantota has been used as an example in accusations that China is practising ‘debt-trap diplomacy’, in which a country extends debt to another country to increase political leverage. However, the ‘debt-trap diplomacy’ hypothesis about the BRI has not been universally accepted by economists and IR specialists.

10,000
The number of scientists from BRI countries that have visited China for research or exchanges. Over the past few years, cultural, digital, and health-related initiatives have been playing an increasingly important role in the BRI, with the focus shifting to “softer” power initiatives, including personal training and the construction of cultural institutions.

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Developing countries have a “huge interest” in Chinese companies and institutions helping with their green energy development, experts have told China Dialogue. But there has yet to be a surge of renewable energy projects finalised under the Belt and Road Initiative (BRI), China’s global infrastructure programme, they said.

Experts spoke to China Dialogue two years after President Xi Jinping promised a shift towards greener overseas energy investments, and ahead of the BRI’s 10th anniversary this autumn.

The slow progress for renewable projects could be down to a range of factors, they explained, such as the long time it takes for deals to be negotiated, expectations realigned and strategies updated, within both China and BRI member countries.

Nevertheless, a few high-profile clean energy projects have been announced this year. They include a 123-megawatt (MW) solar farm in South Africa, to be constructed by Power China; a 50 MW wind farm in Namibia, that has received investment from a consortium led by Energy China; and a 600 MW solar farm in Saudi Arabia, being built by Energy China.

New coal-fired power projects have largely been halted, but a few projects slipped through the net because of “loopholes”, the experts added.

Ditching coal (almost)

At a UN meeting in September 2021, Xi announced that “China will step up support for other developing countries in developing green and low-carbon energy, and will not build new coal-fired power plants abroad”.

Since then, no new investments in coal power plants have been recorded under the BRI, according to the China Overseas Finance Inventory, which tracks Chinese equity and debt investments in the power generation sector. The database is a collaborative effort between five US universities and institutes, and contains transaction details of 652 investments in 569 power plants across 87 BRI countries.

“There is huge interest in having Chinese manufacturers, developers and state-owned enterprises going out and supporting the green energy transition. This is a change,” Christoph Nedopil, an expert in green finance and the BRI, told China Dialogue.

The interest mostly comes from host countries and partly from Chinese companies wanting to be closer to their customers and avoid potential trade restrictions, among other reasons, Nedopil said.

“Most Chinese state-owned companies and banks I know are not interested in coal projects anymore,” he added. “This was not true in 2020, when there was still a lot of talk about the need for coal.”

The shift in mindset can also be found in a lot of host countries, he noted. “The understanding is that coal is less relevant.”

Nedopil is director of the Griffith Asia Institute in Australia. When China Dialogue spoke with him, he was director of the Green Finance and Development Centre (GDFC) at Fanhai International School of Finance, part of Fudan University, in Shanghai. At the GFDC, he published a series of reports analysing BRI investments.

The GFDC’s latest assessment found that China’s energy-related “engagement” – meaning construction and investment – under the BRI in the first half of 2023 was the “greenest” for any six-month period since the initiative’s launch in 2013.

The report looked at the share of renewable projects in all-energy engagement, which includes power generation and exploration of resources related to energy. It found that nearly 56% of the US$12.3 billion that China spent on energy projects during the period went into renewable sources, with 41% going into solar and wind, and 14% into hydropower.

However, some experts emphasised that not all new coal power projects have been scrapped. While Xi’s announcement was “certainly a step in the right direction”, a few projects are still moving ahead, such as a 300 MW coal power plant in Pakistan and a 1.5-gigawatt (GW) plant in Indonesia, Blake Berger, associate director at the Asia Society Policy Institute in New York, told China Dialogue.

“This is where the loopholes begin to come into play,” Berger noted. The plant on Obi, an island in eastern Indonesia, dodged the axe because it was designed as an internal facility of an industrial park instead of a standalone coal power project. On the other hand, the project in Gwadar, in southwestern Pakistan, is not considered “new” by Chinese and Pakistani officials as it was first proposed in 2016 but repeatedly delayed.

Long renegotiation processes

Although many coal power projects have been called off, there has not been a wave of renewable projects coming in to fill the space, some experts noted.

“There have been no major changes,” said Wang Xiaojun, founder of People of Asia for Climate Solutions, a Manila-based non-profit organisation. This was the case “no matter [whether] we count the number of renewable energy projects that has been signed, or China’s total overseas investments on renewable energy projects – or even the types of new renewable energy projects that were built by host countries.”

Although many thermal power projects have been halted, they have not been transformed into renewable energy projects — Wang Xiaojun, founder of People of Asia for Climate Solutions

One possible cause for the “vacuum” – as Xiaojun put it – is the fact that Xi’s one-line pledge did not specify how coal power projects in the pipeline should be dealt with.

The issue, which remains to be explained clearly, has likely caused the Chinese government and host countries to spend a long time renegotiating those projects, Wang said. “Many previously committed coal projects might be under renegotiation to be converted into renewable energy projects,” he explained.

Other experts point out that it takes time for a government mandate to show impact on the ground. Oyintarelado Moses, data analyst for the Global China Initiative at the Boston University Global Development Policy (GDP) Centre, cited the BRI itself as an example. After the initiative was introduced in 2013, it took about three years for large volumes of financing to arrive, she told China Dialogue.

The GDP Centre runs a database that mostly follows the financing from China’s development finance institutions, such as the Export-Import Bank of China and the China Development Bank. The database did not record any energy projects finalised after Xi’s announcement in September 2021.

“I think we are still in that initial time lag period of [Xi’s] announcement. I do expect there to be more low-carbon and renewable energy projects from 2023,” she added.

Host countries also need time to realign their national energy strategies and make decisions on old and new projects, according to Shen Wei, director of the Green BRI Centre of the International Institute of Green Finance at the Central University of Finance and Economics in Beijing.

“A country’s energy strategy is often the result of long-[term] research and preparation by relevant government departments,” Shen told China Dialogue.

“Even though a country’s government halts its plan for an old coal power plant, researching and formulating a new plan is a very complex process and involves a lot of practical questions.” Should the project be in renewable energy, questions might include the type, location, and capacity, Shen said.

Other challenges include the lack of “supportive infrastructure” in some countries, particularly reliable power grids that can take in renewable power – which can be unpredictable and unstable – while still running safely, according to Shen.

The push for ‘small but beautiful’ projects

Renewable energy projects are often much smaller in scale than coal power plants. This means that Chinese energy investors, banks and developers need to apply new business logic and approaches to them.

Chinese state-owned banks are “having to learn how to structure new deals that are focused on renewable energy projects”, said Moses.

China has prompted state-owned enterprises, particularly those directly run by the central government, to adjust their strategies. In February, Zhao Shitang, deputy director of the State-owned Assets Supervision and Administration Commission of the State Council, instructed central-level state-owned enterprises to “incubate a batch of small but beautiful projects with good economic and social benefits” under the BRI, with a focus on areas such as green, health and digital.

That was the first time the phrase “small but beautiful” had appeared in the narrative of the BRI, according to Xiaojun, who described the instruction as “a very good change”.

“‘Small but beautiful’ renewable energy projects, such as distributed, flexible and off-grid projects, can meet the energy demands of host countries and provide a huge stage for Chinese private companies,” Xiaojun commented. “This should be the future direction of energy investments for China under the BRI.”

He called for more government backing for Chinese private companies to help them “play to their full strength … Whether it is policy or financial support, I hope the government can enable private companies to invest in energy projects faster and more flexibly overseas.”

Turning to renewable projects also brings the Chinese into a more competitive investment space, said Nedopil. Previously, China, Japan and Korea were more or less the only providers of technology and public financing for overseas coal power plants.

“If you work on renewable energy, there are a lot more potential investors and technology providers, not only from China, but other countries as well,” he said.

‘Traffic light system’

Several Chinese and international organisations have published useful tools for evaluating the environmental impacts of BRI projects and guiding Chinese companies to invest in more sustainable ways.

One of them is the Green Development Guidance for BRI projects, a collaborative research effort launched in 2019, two years before Xi’s announcement on ending support for new coal overseas.

The series of studies is being led by the Belt and Road Initiative International Green Development Coalition, which was initiated by the Ministry of Ecology and Environment and comprises more than 40 companies, associations, thinktanks and non-governmental organisations from China and around the world.

The guidance is also known as the “traffic light system” because it assesses BRI projects using colour-coded labels based on their impacts on climate, ecology and the environment. Green stands for projects that should be encouraged, yellow indicates neutral ones, and red for those that require stricter supervision and regulation.

The first phase of this effort, which was published in December 2020, red-flagged coal-fired power projects, explained Wang Ye, an associate of the Finance Centre and China Sustainable Investment Program at the World Resources Institute (WRI) China, which co-leads the project. This red flagging supported policy guidance “towards transformative development in China’s overseas energy investments on stopping building [of] new coal power plants overseas,” said Ye.

In the third report of the project, published in May, researchers analysed the role of foreign investment cooperation funds in greening the BRI. These are official funds established by China to meet the financing needs for sustainable development in developing countries. Examples include the China-ASEAN Investment Cooperation Fund, China-Africa Development Fund, and China-Latin America and the Caribbean Cooperation Fund.

“All three funds primarily invest in energy, infrastructure construction and manufacturing capacity, sectors [that are] key to the green transition,” noted Ye.

She underscored the importance of such funds: “How they evaluate projects and manage clients are crucial for aligning investment decisions with local needs, concretising their commitment to sustainability, and shifting financing to green projects.”

Asia Society, a non-profit organisation with offices in the US, Asia, Oceania and Europe, has developed a digital “toolkit” to help local communities and companies involved in the BRI ensure that their projects are “mutually beneficial, equitable, inclusive, and environmentally and socially sustainable”.

Available in five languages – English, Mandarin, Khmer, Lao and Bahasa Indonesia – the toolkit focuses on two “critical aspects”: how to undertake environmental and social impact assessments, and how to ensure engagement from stakeholders throughout the project.

“We designed the toolkit to empower local communities with information to better safeguard and defend their own interest, and to help companies involved in these projects undertake these critical aspects of due diligence in a more systematic way,” the Asia Society’s Blake Berger said.

“We found that even minor adjustments in how projects are undertaken can have a sizeable impact on long-term sustainability of the project and receptiveness of the local population,” he added.

How to go further

Looking into the near future, experts listed several types of renewable projects they wanted to see more of under the BRI.

“One is the local manufacturing of goods related to energy transition,” said Nedopil. His report found that there were not many engagements in the manufacturing of equipment needed for green energy transition under the BRI. “I do hope to see more of these engagements – for example, the manufacturing of solar panels.”

Nedopil also said he hoped to see China step up its support for BRI countries by improving their power grids and helping their existing coal plants retire early.

Xiaojun underlined the importance of a growth in “capacity building” in BRI countries by Chinese companies, such as facilitating technological transfer and relocating some of their renewable supply chains there.

In his view, these moves “can help Chinese companies mitigate some potential supply chain risks, as well as nurture the host countries’ labour market and create electricity demand”.

Training local talent is even more important, he pointed out.

“For the construction of BRI power projects, Chinese companies usually bring their own workers, including technicians, from home.” But moving forward, Chinese companies can train workforces locally, while Chinese universities can also offer electricity and renewable courses for young people from BRI countries, Xiaojun said.

“These practices can truly transform a country: to stop it being a climate victim and help it become a climate victor,” he concluded.

This article was originally published on China Dialogue under the Creative Commons BY NC ND licence.

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Associate Professor at Prague University of Economics and Business Jeremy Garlick examines China’s global policies, notably towards the global South, and its emerging financial and influential footprint worldwide in his new book Advantage China: Agent of Change in an Era of Global Disruption (Bloomsbury, 2023). What is the state of play with the seemingly troubled Belt and Road Initiative (BRI)? Can we unpack China’s multitude of new and ongoing ‘global’ initiatives? Can the Xi administration admit any policy weaknesses and re-tweak, or are they stuck in a fixed mindset? And, is this current property crisis going to be the property crisis, or will China once again deflate the debt bubble?

Paul French caught up with Jeremy Garlick to discuss these issues and more.

You suggest that the Belt and Road Initiative (BRI) has been a success for China. However, right now, it doesn’t seem to be going so well. What do you think? Is the BRI initiative over, or just stalled?

It’s true that BRI investments have slowed down since their peak in 2016-2017. Initially, this was the result of a deliberate decision by the Chinese government to rationalise spending so that money was not being wasted on vanity projects such as football clubs. Then came the pandemic, which obviously impacted China’s relations with the rest of the world. Now, China’s economic growth is slowing, and there is a housing crisis, so overseas investments have been shoved even further down the priority list.

However, one should realise that the BRI was never just about infrastructure investments. It was also an attempt at nation branding, aiming to boost China’s image and soft power across the Global South. An important part of this has been what the Chinese call ‘people-to-people exchanges’: offering training trips to China to groups of military officers, journalists and officials. Such junkets are a relatively inexpensive way for Beijing to influence elite groups in developing countries. There is plenty of evidence – some of which I outline in the book – that people-to-people exchanges are going on apace, mainly under the radar of the Western media and experts, and that they have given Beijing increased clout in many countries in the Global South.

In other words, the BRI is far from over. However, what we are now seeing may turn out to be a process of rebranding and recalibration of aims within the flexible envelope Beijing has created for its foreign policy vis-à-vis the Global South.

You note that the BRI was an extension, or a follow on, from China’s former Going Global initiative. Do you think that in the near future, we will see a new policy push adapting to current conditions both inside and outside China?

In fact, three new global initiatives were introduced last year: the Global Development Initiative, the Global Security Initiative, and the Global Civilisation Initiative. Essentially, although these remain rather unsubstantiated, they expand on the BRI by emphasising an aspect of Chinese foreign policy which was not explicitly included previously. The BRI came to be seen primarily as an infrastructure megaproject. Now, a decision seems to have been taken to focus on sustainable development goals, security issues, and China’s efforts to spread its vision of a “community of shared destiny” for the Global South. Interestingly, Beijing promotes its notion of ‘global civilisation’ as an alternative to the current international system. The West tends to believe that the present order promotes universal values, but Beijing perceives it – not unfairly – as being dominated by Western agendas.

Essentially, I would say all these past and present initiatives should be seen in the context of the Chinese government seeking to restore national pride by gradually taking on what it sees as its rightful role as a leader of the Global South. China aims to lead the formerly colonised developing world into a more active position in global affairs.

You mention that one of China’s strengths in the post-Mao period has been the ability to recognise failure and then reassess policies as necessary. This was certainly true under Deng. Do you think this ability to realistically reassess is possible under Xi?

Here, there is a bit of a question mark. Xi Jinping has entrenched himself in the corridors of power, extending his rule beyond the two terms that were previously the limit. Like most leaders who have clung tenaciously to power without limits, there is a danger that Xi will become over-confident in his ability and paranoid towards those who attempt to challenge his views. There are signs of this being the case. For instance, the recent sudden sidelining of the erstwhile foreign minister. If Xi becomes incapable of listening to the advice of his subordinates, or they become too afraid to criticise, there is a risk that policy will fossilise and China will be set on a fixed route under Xi from which there is no willingness to shift.

However, I believe there is also evidence that Xi has not yet reached the point of no return on this issue. For example, late last year, there was a sudden U-turn on zero-Covid policy as a result of public pressure. In the foreign arena, China seems to have changed its approach to Pakistan, resisting pressure to pour more money into a black hole of debt. Xi is educated in Chinese history and knows what happened to the Qing dynasty, which proved unable to adjust to the tide of history turning against it. He is surely aware of the need to be responsive to changing circumstances or risk being dethroned.

Property bubbles in China have been successfully deflated before. But the current levels of debt and issues in the housing market seem a step further than we’ve seen before. Do you think the property sector will be a major economically destabilising crisis in the near future?

The Chinese government has been seeking to deflate the property bubble for years. The current situation is the result of their efforts to reduce house prices and restructure the housing market by restricting construction companies’ access to finance. Obviously, this is no easy task. Even in 2010, when I was living in Beijing, house prices had become extraordinarily inflated and beyond the reach of many ordinary Chinese. This was a major problem for the Communist government, which has always sought to present itself as having the interests of the poor at heart.

In other words, the current problem is one that the government has not only anticipated but even facilitated. Yes, it is destabilising. However, I believe the government sees the current problems as an essential stage in restructuring the Chinese housing market and the overall economy. It believes the housing crisis is a necessary evil, a temporary forced downturn in China’s overall upward development trajectory. Economic turbulence has been overcome previously, and it can be overcome in this case too.

One of your clear messages is that we ‘need to learn the lessons of the Chinese approach to international development and change how we approach this subject.’ Can you expand a bit on how you think we can compete with China in the developing world, especially given both our strained finances and colonial history?

The most important lesson we need to learn from both China and our history is the need to respect the countries of the Global South – to treat them as equals rather than victims requiring pity and aid. Developing countries feel both patronised and neglected by the West. They also remember the colonial era keenly. What they want now is to be acknowledged as actors in their own right rather than ignorant and incapable of solving their own problems. Of course, they need financial assistance – some of which they obtain from China – but without having to listen to lectures on how to behave from Western countries.

At present, everybody’s finances are strained. China has problems, too, which is why it has been cutting back on BRI investments. Western countries are not poor and there is always a way to find some money if the will is there. Many countries do not actually want to take Chinese money but feel that they have no choice. The key is to provide some finance but on the basis of dealing with countries as equals rather than underlings, building mutual trust. A little more effort on the part of Western countries to show a deeper respect and understanding for the circumstances and traditions of developing countries would go a long way.

Realistically, can the UK still be a player in the Global South up against the ‘benefits’ China is offering right now? And if not, is there an alternative strategy we could pursue to compete globally?

I don’t see any way the UK can compete with China if it tries to act on its own. The UK needs to resume closer cooperation with Europe or the US (or both) if it is to achieve anything in the Global South. As a solo actor, the UK has to come to the realisation (finally) that the days of the Empire are long gone, and it is no longer able to influence world affairs in the top-down way it once did. In the UK’s position of diminished influence, close coordination and cooperation with other countries are essential.

One possible strategy for the UK to compete might be to engage with the Commonwealth countries as equals, working with them to construct a network of cooperation which could counter Chinese influence. If this strategy were employed, it would be essential to utilise a listening rather than lecturing approach, to take the time to understand the other nations’ needs.

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At the summit in Germany in late June, the heads of government of G7 countries announced the launch of a USD600 billion infrastructure programme – now called the Partnership for Global Infrastructure (PGII) – to boost investment in developing countries. Although this is undoubtedly a positive signal, its framing as a ‘competing offer’ to China’s Belt and Road Initiative (BRI) highlights the misunderstanding which – nearly a decade after its inception in 2013 – still plagues Western governments’ thinking about China’s engagement with third countries. 

According to the White House communique, PGII aims to mobilise USD600 billion in infrastructure investment from G7 countries by 2027, including USD200 billion from the United States alone. The programme wants to “deliver quality, sustainable infrastructure that makes a difference in people’s lives around the world, strengthens and diversifies our supply chains, creates new opportunities for American workers and businesses, and advances our national security.” 

Beijing’s reaction was rather positive. As Zhao Lijian, the spokesperson of the Chinese Ministry of Foreign Affairs, noted at a press conference, “China always welcomes initiatives that promote global infrastructure.” Zhao, of course, pointed out that PGII and BRI can be complementary and should not exclude each other based on geopolitical considerations. 

China’s response should come as no surprise to those familiar with BRI projects and developments. What’s more, a proper analysis of the strengths and shortcomings of China’s experience in overseas infrastructure projects is essential if PGII is to become a successful tool to help developing countries and Western businesses operating in them.

Understanding the drivers of BRI 

Ever since Chinese President Xi Jinping presented his idea of the ‘One Road, One Belt’ initiative at a speech in Kazakhstan in 2013, the BRI has captured the imaginations of foreign analysts. While some were fascinated by the idea of a modern ‘Silk Road,’ others saw it as a master plan for Chinese world domination. 

Seasoned China watchers were more cautious, pointing out that the new BRI label (or OBOR as it was first called) was indiscriminately attached to nearly all Chinese outbound investment and aid projects, no matter how far in advance they preceded Xi’s speech. There are, however, several factors which have pushed BRI beyond China’s traditional ‘foreign aid’ policies: 

• Overcapacity: The large stimulus following the financial crisis in 2008 created a massive surplus capacity in infrastructure and related sectors. Outbound investment and foreign construction projects thus offered an outlet for these industries.
• Commodities: China’s economic rise increased the dependency on foreign raw materials, triggering a frenzy of Chinese investments in oil fields and mines around the world.
• Regional Development: One of the major reasons for the ‘ New Silk Road’ plan was to improve the connectivity between China’s poor inland provinces to major export markets in Europe, especially via rail.
• Global ambitions: with growing affluence came growing ambitions. Using outbound investment to shore up support for China’s clout in the UN and other international bodies. 

Given that domestic overcapacity was a key driver of BRI, it is of little surprise that most BRI projects were in these sectors. According to a 2019 report by the data provider Refinitiv, the vast majority of Chinese investment — some USD500 billion — went into transport (road and rail), power plants and real estate, accounting for a staggering 85% of the total. 

But even within these three categories, there are variations. As a report on Chinese overseas port investment by the Grandview Institution – a Chinese think tank – noted, there is a vast gap between China’s port presence in Djibouti – a purely military project – and Chinese investment in ports in Piraeus or Darwin, which are purely commercial. According to Refinitiv data, only 63% of surveyed BRI projects were financed directly by the Chinese government, with 31% managed by private entities and another 5% run by public listed companies.

BRI projects by industry (left); BRI projects by main source of financing (right). Source: Refinitiv

The debt-trap myth 

Despite the large variety of BRI projects, most of the West’s thinking about BRI is still shaped by the perception of Chinese financial aid as some sort of debt trap. The idea goes back to a polemical essay by Indian professor Brahma Chellaney for whom Chinese investment – especially in Sri Lanka – was nothing short of a hideous masterplan for world domination. Despite experts such as Deborah Bräutigam of Johns Hopkins University and Lee Jones and Shahar Hameiri of Chatham House thoroughly debunking the ‘debt trap diplomacy’ myth, it seems that Western politicians were eager to embrace the framing to suit their own political agendas. 

Yet this misunderstanding by Western governments not only ignores the agency of recipient countries, but it also increases the risk for PGII to make the same painful mistakes of some of the more controversial BRI projects. As Jones and Hameiri pointed out in their lengthy report on the initiative, most loans aren’t imposed by Chinese investors on hapless developing countries, but are, instead, defined by these countries themselves.

This is, for example, the case with the controversial Hambantota Port in Sri Lanka, which was an idea of the now ousted Premier Mahinda Rajapaksa. That such a hands-off approach by Chinese investors can lead to massive misallocation and corruption, is something that the Chinese government itself had to find out the hard way. 

However, relying on local authorities to define investment priorities can also be beneficial. As a Carnegie report on BRI investment in Argentina shows, Chinese investment can, indeed, play a crucial role in helping third countries meet their own development goals. 

In deciding on projects, Chinese investors have long sought help from outside consultants and have also teamed up with Western institutions to improve the quality and risk management of BRI activities. For example, China collaborates with the European Bank for Reconstruction and Development (EBRD) to support green development projects in Central Asia. China has also signed so-called third-party market cooperation agreements — including with France, the Netherlands, Belgium, Spain, Austria, Japan, Singapore and Australia — to allow for foreign participation in BRI projects and to ensure that projects meet international standards. 

What can PGII contribute? 

So, given that China is already collaborating with external investors and stakeholders to make BRI projects greener and more sustainable, what exactly can PGII contribute? Pradumna B. Rana of Nanyang University, Singapore, thinks that Western infrastructure programmes can help in three particular areas:

• ‘Soft’ vs ‘hard’ infrastructure: with Chinese investment often focusing on bricks-and-mortar infrastructure projects, Western investors could concentrate more on ‘soft’ infrastructure, such as education, healthcare and gender equality projects.
• Private capital: attracting private capital has been notoriously difficult for BRI investments. PGII could alleviate this shortcoming and help ‘crowd in’ funds from private businesses
• Resource additionality: According to UN estimates, countries would have to invest USD2.6 trillion (£2.3 trillion) annually until 2030 to meet the United Nations’ Sustainable Development Goals. So, additional investment from developed countries could complement, rather replace Chinese funding.

BRI, PGII and the Global Infrastructure Gap (BRI value as of 2021, PGII value as stated by the US government)
Source: White House; World Bank

Japan’s own attempt at setting up a BRI alternative – the Quality Infrastructure Investment (QII) initiative – offers another important lesson on how PGII and BRI could create synergy rather than geopolitical friction. Initially set up within Japan’s strategic framework of the Free and Open IndoPacific (FIOP) and to promote sustainable and high-quality infrastructure investment, Japanese investors ended up cooperating rather than competing with China’s own BRI projects. As Alisher Umirdinov of Nagoya University points out, the high investment amounts required for large-scale infrastructure projects combined with the risk management imperative of diversifying funding sources made it ultimately more reasonable for both countries to pool resources and know-how rather than launching separate construction projects. 

The CBBC View

It seems that the current framing of the G7’s Partnership for Global Infrastructure (PGII) might be based on a misunderstanding of China’s BRI and ignores the participation of many Western (and Japanese) development agencies in its projects. 

What’s more, a PGII driven by geopolitical rather than practical considerations would expose investment decisions to the same risks as some of the more controversial BRI projects (e.g. those in Sri Lanka and Venezuela), namely the funding of economically unviable projects supported by ‘friendly’ but politically unstable governments.

Instead, the convergence of due diligence requirements for Chinese and Western investors increases the likelihood that PGII might follow the tracks of Japan’s own BRI competitor, QII. This would mean an increase in collaboration, more diverse funding, and higher standards for international infrastructure projects – a result that’s not only more optimistic but also more realistic.

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A global contest is brewing. China, the US, and the EU are all vying for influence along routes that Beijing first turned its attention to in 2013 when President Xi announced his Belt and Road Initiative (BRI), that would bring the ancient Silk Road into the present day. It hasn’t always been this way. In the years preceding the outbreak of Covid-19, cooperation was the name of the game when it came to the BRI. In 2019, while attending the BRI Forum in Beijing, Britain’s then Chancellor of the Exchequer, Phillip Hammond, came close to signing a Memorandum of Understanding that would have given Beijing Britain’s backing. Fast forward to the present day, and the US is spearheading the creation of the Build Back Better World (B3W) initiative within the G7, while the EU has unveiled plans to launch a “Global Gateway” scheme.

So how does Britain fit in? And why is a country that once called the BRI “an extraordinarily ambitious vision” now debating whether it would be better throwing its lot in with Brussels and Washington?

Background

The BRI, also known as One Belt, One Road (OBOR), is one of the main load-bearing pillars of the Xi administration’s foreign policy. A diverse portfolio of overseas investment and construction projects rolled into a new, China-led model for interactions between countries, combined with a channel through which to transfer Chinese overcapacity, the BRI certainly is, as Phillip Hammond once noted, “a project of truly epic ambition.”

Stretching from China into Europe and traversing the continents of Central Asia, Africa, and the Arctic, China uses the investments its state-owned banks and companies makes along the route of the BRI to deepen its access and influence on the world stage, particularly in the Global South. Chinese banks and corporations have made over $2 trillion in foreign direct investments since 2005. The Trump administration worked hard to brand these investments as part of a “predatory lending programme” or a “debt trap,” but this claim has been widely refuted.

The prevailing view among scholars studying the BRI and how it fits into China’s new globalism is that there is no such “debt trap,” nor is China doing anything untoward to exploit the countries once its firms have invested. Research shows that China has never actually seized an asset from any country owing funds and that Chinese banks are willing to restructure the terms of existing loans. As such, the prevailing motivation behind the West’s increasing desire to provide an alternative is to halt the spread of the ‘China option.’

If that is the case, then the clock is ticking, and China has a clear first-mover advantage. Chinese companies have become more professional in their dealings overseas. Meanwhile, the governments of the countries within which Chinese entities focus their investments seem to find the alternative financial and legal institutions that are being set up in parallel to the Bretton Woods system, to handle BRI disputes, to be very appealing. Distinguishable by their informality, ad hoc design, and preference for soft law over systematic formal rules, whether China plans to align its terms and conditions with international (read: Americanised) best practices remains unclear.

What are the Western alternatives to the BRI?

It might be too little too late to halt China’s emergence in the Global South. It could be that there is just too much Chinese capital flowing through these emergent economies already, rendering the West’s efforts to dissuade BRI countries from subscribing to China’s offer of an “Asian model” of economic development a futile endeavour.

That said, the US-led, G7 B3W initiative plans to narrow the “$40 trillion in infrastructure investment that developing countries will need by 2035”; $2 trillion has already been committed by the US, with other G7 members currently considering their contributions. Compared to the infrastructure focus of the BRI, the B3W initiative targets areas such as climate health, digital technology, gender equity, and health security, and is heavily private sector-led.

Brussels, meanwhile, has announced the Global Gateway (GG), a spending plan that will see $300 billion directed at countering China’s economic influence, predominantly across the African continent. Like B3W, GG is private sector-led and the text of the initiative specifies that it is about “rule of law, human rights, and international values.”

Where does the UK fit in?

The UK is a member of the G7, so presumably will transition its tacit support for the BRI to the US-led initiative, B3W. Foreign Secretary Elizabeth Truss has already indicated that she plans to align her department with the initiative’s objectives. What this means for UK-China relations depends on how closely the Johnson cabinet seeks to align its departments with their counterparts in the Biden administration. Were the UK government to pursue a policy of exclusive alignment with B3W, that could create complications with China because the Department for International Trade and the National Development & Reform Commission still have a Memorandum of Understanding in place from the 2019 Economic & Financial Dialogue focussed on third market cooperation (Read: BRI).

While the British government has kept its cards close to its chest concerning B3W – which remains scant on detail – and has not revealed its formal intentions vis-à-vis aligning with America’s vision, the UK and China reportedly plan to hold an economic and financial dialogue (EFD) in 2022, which could put pressure on the Johnson government to choose sides. Given that the UK and China have successfully delivered on almost all the outcomes agreed at the previous meeting, it is hard to see a palatable diplomatic exit ramp – for want of a better expression – for DIT to use should it want to extricate itself from further UK-China collaboration along the BRI. Ms. Truss has been far more hawkish towards China, however, so it will be up to the Prime Minister to bring the Foreign, Commonwealth & Development Office into alignment with DIT on further cooperation with China along the route. DIT, rather than the FCDO, currently coordinates the bulk of UK cooperation with China relating to the BRI.

The CBBC View

The BRI could become awkward for Britain as it tries to juggle asserting itself as a prominent, global trading nation and being a determined defender of multilateralism and the rules-based order. British firms have done well through partnering with Chinese state-owned enterprises along the route, particularly in the built environment and financial and professional services sectors – as a result, the British and Chinese governments have managed to tick off all the policy outcomes relating to the BRI from the last EFD. The BRI differs substantially from the US and Europe’s new offerings; it does not share their values-based approach for a start. Underlying the initiative is the idea that China is just as capable as the US in global leadership and governance – could cooperation along the route become the next area where the UK comes under pressure from the US and China to choose a side?

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