China’s Belt & Road Initiative: Some Shifting Challenges Seeing China Not Expanding Investment Abroad

• 20 September 2023
• Construction Focus
• 1453 Views

A decade since China first proposed the Belt and Road Initiative (BRI), this ambitious global investment project has significantly expanded both trade and China’s international influence. Ten years in, Beijing undoubtedly wields greater clout on the global stage, but this milestone also comes with notable shifts in new investments.

Positive results from the implementation of the Belt and Road Project:

More than 150 countries, including Cambodia, have inked memorandums of understanding with China, cementing their commitment to cooperation on investments. This October, China will host the third Belt and Road Forum in Beijing, showcasing its ongoing dedication to the initiative, according to Nikkei Asia’s News on 7 September 2023.

China’s trade with Belt and Road participants surged by a remarkable 76% from 2013 to 2022, outpacing the 51% increase in China’s overall trade, according to its customs agency. Furthermore, China’s trade surplus with Belt and Road countries has steadily grown, reaching US$197.9 billion for the first seven months of 2023 and poised for a new annual high. This surplus, representing approximately 40% of China’s total, has provided valuable leverage amid escalating tensions in its trade relationship with the U.S.

Economic ties with emerging nations have significantly bolstered China’s influence on the international stage. As Junya Sano of the Japan Research Institute notes, “Belt and Road kept China from becoming isolated within the United Nations.”

Challenges of implementing the Belt and Road Project:

Conversely, Belt and Road countries are grappling with mounting trade deficits, while their hopes for expanded access to the Chinese market are slowly fading. A case in point is Italy, which joined the initiative in 2019 as the sole member of the Group of Seven to do so. In the span of three years through 2022, Italy’s trade deficit with China doubled.

Italian Foreign Minister Antonio Tajani candidly remarked, “The Silk Road did not bring the results we expected.” Italy is now contemplating its future within the framework.

China’s stringent conditions on Belt and Road-related financing have also ignited concerns. Instances such as Sri Lanka’s struggle to repay its debt, which led to China gaining control over the Hambantota port on a 99-year lease, have fuelled apprehensions of falling into a “debt trap,” despite China’s denials.

China’s domestic economic slowdown and a surge in defaults, partly due to factors like COVID-19, have contributed to this decline. The nation’s foreign reserves, the lifeblood of new investments, have remained relatively stagnant at just over US$3 trillion. Consequently, China’s capacity to invest in emerging countries is not expected to experience a dramatic increase.

However, the BRI, with its emphasis on infrastructure development, is not fading into obscurity. Instead, China is recalibrating its approach, with President Xi Jinping advocating for enhanced profitability in Belt and Road projects.

• Analysis