BRI Forum Brief: China Shifts from Building Major Infrastructure to Focusing on Digital Connectivity

• 19 October 2023
• Construction Focus
• 3948 Views

In an era of evolving global dynamics, China’s Belt and Road Initiative (BRI) is poised for a transformative second decade, signaling a shift towards more efficient, market-oriented, and less debt-burdened projects. President Xi Jinping’s recent pronouncement on the future of BRI as “small yet smart” is underpinned by valuable lessons learned. This strategic shift comes as a response to past challenges and critiques, notably the debt distress experienced by some participating countries.

The Evolution of China’s Belt and Road Initiative in the Next Decade: As the Belt and Road Initiative (BRI) enters its second decade, Chinese banks are charting a new course for this monumental project, drawing upon hard-earned lessons from the past ten years. The bank has come to a profound understanding: investing in infrastructure, particularly in economically challenged countries, presents formidable challenges.

Over a third of BRI projects with these nations have grappled with major issues, revealing that many risk assessments and debt sustainability analyses by Chinese financiers didn’t meet the necessary standards. As a report from the Council on Foreign Relations noted on 17 October 2023, these hurdles have underscored the complexities of such ambitious ventures.

Consequently, Chinese banks have reassessed their criteria for future funding, marking a noticeable shift from large-scale infrastructure projects in developing countries within the BRI framework.

The future trajectory of the BRI is becoming clear. It is likely to be more streamlined and efficient, with specific goals and greater cost-effectiveness. The emphasis will be on less risky projects, aligning with the three pillars of this year’s forum: connectivity, green development, and the digital economy. Beijing will collaborate closely with partner countries in these key directions in the coming years.

Expect a reduced focus on mega rail, port, and airport developments compared to the past decade. Instead, the future will see China prioritizing digital connectivity, setting standards, offering training, and fostering people-to-people ties.

China to start using previously developed infrastructure to strengthen global power: But this shift in BRI focus doesn’t translate to diminished consequences. Digital connectivity, for instance, may give China a strategic edge and help bolster its global governance norms, providing an avenue to outpace competitors.

While China may be less inclined to fund massive infrastructure projects, the BRI remains a powerful tool for navigating the intensifying competition between China and the United States. This is particularly true in China’s efforts to strengthen its support in less developed countries and form a counterweight to the prevailing international order led by the U.S.

China’s recently published white paper underscores this, particularly in its focus on smaller nations. The white paper underscores that economic globalization dominated by certain countries has failed to deliver inclusive development. Many developing nations have struggled to benefit from this trend, and some have even lost the capacity for independent development, hindering their path to modernization.

During the recent summit, Chinese President Xi Jinping reiterated the importance of “promoting solidarity between South-South countries and emphasized his commitment to a range of pivotal actions, revealing an ambitious blueprint for the Belt and Road Initiative’s (BRI) future. These actions include setting up an e-commerce cooperation pilot zone and expanding the network of free trade deals with BRI participants. China’s external trade is poised for remarkable growth, with a staggering forecast that it will surpass US$32 trillion between 2024 and 2028. This is a monumental leap, considering China’s total trade stood at US$6.3 trillion just last year.

• Analysis
• Economy and Finance
• Policy and Strategy
• BRI