Has China's Belt and Road Initiative been a success? | FT

Summary

The 10th anniversary of China's Belt and Road Initiative (BRI) is marked by an extensive lending of nearly $1 trillion for global infrastructure projects, primarily in developing nations. While it has spurred economic growth and local employment, the BRI has faced controversies due to high-risk investments and the need for bailouts. China's domestic economy has also benefited from the initiative, but there's a growing emphasis on sustainable 'green BRI' projects as the initiative evolves amid global challenges like climate change and population growth.

Takeaways

• 🎉 The Belt and Road Initiative (BRI) marks its 10th anniversary, being the largest development program ever by a single country.
• 💼 Over a decade, Chinese financial institutions have lent nearly $1 trillion to finance infrastructure projects globally, mainly in developing countries.
• 🌐 BRI was initially seen as China's offer of global public good, providing infrastructure and connectivity to foster trade and economic development.
• 🏭 It also served to address China's domestic economic issues, such as excess capacity and overheating post-global financial crisis.
• 🚄 Significant infrastructure projects have been undertaken, including railways in Nigeria, Ethiopia, Kenya, and high-speed rail in Southeast Asia.
• 🏗️ BRI investments have led to local employment, income increases, and urban transformation in recipient countries.
• 💡 However, the high-risk nature of infrastructure investments and the long-term payoff have raised concerns about the economic rationale of some projects.
• 📉 There have been instances where Chinese projects struggled post-construction, leading to bailouts by the Chinese government for indebted countries.
• 💸 The Chinese government's bailouts are more about protecting its own banks than directly aiding recipient countries.
• 🔄 A shift in China's approach post-2015, marked by a more conservative stance and reassessment of overseas risks, especially after losing a quarter of US dollar reserves.
• 🌿 The future of BRI may see a focus on 'small and beautiful' projects and a greener, more sustainable approach to infrastructure investment.
• 🌍 The impact of COVID-19 and China's policy banks' risk aversion could lead to a decline in BRI lending, but China remains a key player in climate investment and renewable technology for developing countries.

Q & A

What is the Belt and Road Initiative (BRI)?

The Belt and Road Initiative, also known as the BRI, is a global development strategy initiated by China, aimed at enhancing regional connectivity and economic cooperation through infrastructure development and investment in nearly 70 countries and international organizations.

How long has the BRI been in existence?

The BRI has been in existence for 10 years as of the time of the transcript, marking its 10th anniversary.

What has been the total amount of Chinese financial lending under the BRI over the last decade?

Over the last 10 years, Chinese financial institutions have lent close to $1 trillion to finance infrastructure projects around the developing world as part of the BRI.

What were the initial purposes of the BRI?

The BRI was launched with multiple purposes: to serve as China's global public good offer, particularly to the developing world, by providing infrastructure, finance, and connectivity to foster trade, growth, and economic development; and to help China's domestic economy resolve its own problems and achieve strategic and economic interests.

How did the BRI help China domestically after the global financial crisis?

Following the global financial crisis, the Chinese government pumped a large amount of capital into domestic economic stimulus, leading to massive infrastructure construction and investment in heavy industries. The BRI helped by pushing companies and exporters to seek better returns in international markets and by injecting capital into China's policy banks and financial institutions to support Chinese companies to win overseas contracts.

What are some examples of large-scale infrastructure projects undertaken under the BRI?

Examples of large-scale BRI projects include standard gauge railways in Nigeria, Ethiopia, and Kenya, high-speed railways in Southeast Asia, and port investments in Kenya and Pakistan as part of the China-Pakistan Economic Corridor.

What kind of impact has the BRI had on recipient developing countries?

The BRI has brought local employment, increased incomes in some areas, and transformed the landscape of cities across countries like Ethiopia and Kenya by providing much-needed infrastructure.

What are some of the controversies surrounding the BRI?

The BRI has faced controversies due to the high-risk nature of infrastructure investments, which are long-term and slow to break even or make a profit. Some projects have struggled to make economic sense after construction, leading to the Chinese government having to bail out countries that have borrowed through the BRI.

How has China's approach to the BRI changed over time?

China's approach to the BRI has shifted from a period of exuberance in the early 2010s to a more conservative and risk-averse stance after 2016, particularly after China lost a quarter of its US dollar reserves following the 2015 stock market crisis.

What is the current stance of the Chinese government on continuing BRI bailouts?

The Chinese government is not necessarily bailing out recipient countries but rather its own banks. The finance lent to borrowing countries ultimately goes back into paying China's policy banks or commercial banks, and the central bank aims to keep these financial institutions afloat and financially healthy.

What is the future of the BRI in light of the changing global landscape and China's internal reassessment?

While the BRI as a narrative continues to hold top-level political commitment, the rhetoric has shifted towards supporting 'small and beautiful projects' and a greener, more sustainable BRI focusing on cleaner forms of infrastructure investment. The impact of Covid and growing conservatism in China's policy banks suggest a decline in overseas lending.

How can China contribute to the developing world's infrastructure needs amidst climate change and population growth?

China can play a significant role in climate investment by supporting the energy transitions of developing countries through the provision of renewable technologies, such as solar panels and wind turbines, which are manufactured and produced at scale in China.