China Reboots Its Belt and Road Initiative..WSJ



China Reboots Its Belt and Road Initiative

Beijing is trying to make lending under the infrastructure program less risky 10 years after launching it

Oct. 16, 2023 7:59 am ET

China is preparing to host a 10th anniversary bash for its Belt and Road Initiative this week. PHOTO: ZINYANGE AUNTONY/AGENCE FRANCE-PRESSE/GETTY IMAGES

A decade after its launch, China is trying to revive its sprawling infrastructure program by making it a lot less risky.

A reboot of the program is under way as Chinese leader Xi Jinping prepares to host a 10th anniversary bash for the Belt and Road Initiative in Beijing this week. The goal is to breathe new life into a project that remains central to China’s global ambitions after a rocky spell of bad debts and costly bailouts—while preventing a repeat of the excesses that contributed to those troubles in the first place.

The megaprojects of the past are giving way to smaller, more targeted deals, including in sectors such as green energy and healthcare. A bigger pool of ese lenders is putting up financing following a pullback in lending by China’s large policy banks. Rather than charging in alone, these newcomers are teaming up with Western banks and multilateral lenders to tap their experience in managing the risks of doling out big sums to shaky borrowers.

Representatives from more than 130 countries will attend this year’s Belt and Road Forum, according to the Chinese Foreign Ministry. But it isn’t clear which countries are sending their top leaders. Russian President Vladimir Putin has said he would attend. Neither President Biden nor leaders of Europe’s major powers are attending, reflecting souring ties but also the skepticism that has grown around the project since it began.

There are, nonetheless, signs the initiative is regaining some momentum after lending and construction dropped during the pandemic. In the first six months of 2023, Chinese firms signed BRI-related construction and investment deals valued at a combined $40 billion, according to a tally of Chinese projects worldwide published by the American Enterprise Institute, a conservative U.S. think tank. If that pace of activity is maintained, deals agreed this year would eclipse the $68 billion of projects agreed in 2022.

Still, before the pandemic, annual BRI outlays typically exceeded $100 billion a year. Average deal sizes in the past few years have also been smaller than in that prepandemic heyday, too.

Beijing’s pursuit of a more disciplined program after recent challenges means the BRI probably won’t regain its prior scale soon, say analysts who track the project closely. Another uncertainty is whether countries will still be as eager to participate after debt troubles rocked BRI borrowers including Sri Lanka and Zambia.

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“The BRI isn’t dead. It did take a long nap,” said Derek Scissors, a senior fellow at the AEI. “Beijing is willing to re-energize the BRI postpandemic, but not back to prepandemic levels of activity.”

Xi launched the Belt and Road Initiative in 2013, promising the world a bounty of roads, railroads, ports and energy projects financed by Chinese money and built by Chinese hands. He soon proclaimed the ambitious plan “the project of the century,” with the ultimate goal of linking Asia more closely with Europe, Africa and Latin America.

For developing countries, the BRI offered an infrastructure makeover while avoiding sometimes stiff conditions on political reform, the environment and other sensitive issues that typically came with Western development dollars. Richer countries saw a chance to spruce up aging facilities and boost trade with the world’s second-largest economy.

For China, BRI gave Beijing the opportunity to earn fatter returns on its abundance of foreign-exchange reserves, as well as a chance to build alliances and persuade others of the benefits of its non-Western version of economic development. It also opened the possibility of securing supplies of raw materials while finding new customers for its exports.

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A deep seaport is being built in Lagos, Nigeria, with China’s backing. PHOTO: SUNDAY ALAMBA/ASSOCIATED PRESS

“For China, the main benefit is geopolitical—a way to buy friends and influence,” said Julian Evans-Pritchard, head of China economics at Capital Economics.

Between 2013 and 2022, $960 billion of construction and investment deals had been reached between China and BRI participants, according to one estimate by China’s Fudan University. Other tallies seek to measure lending totals or direct investment flows, though most put total BRI commitments at around the $1 trillion mark, with projects spread across some 150 countries. It isn’t always clear which overseas projects fall under the BRI and which don’t.

Ten years on, the initiative is under pressure. In recent years, Beijing has shoveled billions of dollars in bailouts to poorer countries struggling to pay back their BRI loans thanks to Covid-19 and rising interest rates. Chinese lenders faced criticism for dragging their feet on restructuring the debt of Sri Lanka and Zambia.

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Lending to Africa in particular has fallen sharply. Chinese banks extended just under $1 billion in new loans in Africa last year, compared with $8.5 billion in 2019, according to a database of Chinese lending to Africa maintained by Boston University. 

Another challenge for Beijing is that skepticism about the project has grown, especially in Western countries that are uneasy at their perceived overdependence on China’s economy already. Italy, the only member of the Group of Seven advanced economies to sign up, is now seeking to leave.

Italy joined the BRI with one specific goal, according to officials: to boost exports to China, which lagged behind those of other European countries such as France and Germany. That hasn’t happened, partly because of the pandemic and partly because successive Italian governments blocked Chinese investments in sensitive companies.

Greece, similarly, has sought to distance itself from China after initially embracing the BRI idea. China’s biggest shipping company, state-owned Cosco, secured a majority stake in the port of Piraeus in Greece in 2016 and planned to turn it into a key gateway for Chinese trade with Europe. Xi at one point called the port the “dragon head” of the BRI in Europe.

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But public and political enthusiasm for Chinese investments cooled after the Piraeus investment was seen as bringing limited economic benefit. Greek officials recently lobbied the U.S. government to invest in Greek shipyards to limit China’s foothold.

Xi and China’s top leaders are hoping the forum will help spark renewed interest in the BRI, especially in developing economies hungry for infrastructure. A document published this month by the State Council, China’s cabinet, talked up the economic benefits of BRI participation including increased trade and investment with China. It namechecked significant projects such as a railroad linking Laos with China’s Yunnan province as well as smaller scale endeavors such as the workshops named after an ancient Chinese woodcrafter that today teach people in Africa and Asia technical subjects including robotics. The paper described how China wants to promote deeper cooperation in a host of areas, including the arts, media, health and finance.

A China-built rail line in Laos aims to jumpstart the country’s exports and provide China a key link to overseas markets. WSJ explores the ambition behind the $6 billion project—part of China’s Belt and Road Initiative—and the economic implications for the region. Photo: Jiang Wenyao/Zuma Press

Linda Calabrese, a China specialist at the ODI think tank in London, said developing countries are still broadly receptive to China’s offer of economic development, though they have grown more cautious over how exactly projects will be financed following the well-publicized economic difficulties of borrowers such as Sri Lanka.

“People are not nearly as concerned with China as we are in Europe or the U.S. For them, it’s just another player who can offer them stuff,” she said.

An important part of the BRI reboot, some analysts say, is how China finances BRI lending. As borrowers hit debt difficulties, loans from large lenders such as the Export-Import Bank of China and China Development Bank have shrunk in recent years, according to Boston University data.

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Yet other state-owned lenders have quietly been stepping up, said Brad Parks, executive director of AidData, a research lab that tracks China’s overseas finance at William & Mary, a university in Williamsburg, Va. Often, these lenders are joining groups of foreign banks in bankrolling infrastructure projects to spread the risk if payment problems emerge.

In 2021, for instance, Bank of China and

 joined lenders including

, Citibank and the World Bank’s International Finance Corporation in a syndicate that lent $360 million for the development of a natural gas field in Iraq, according to AidData records.

After getting burned by bad debts, Beijing is effectively outsourcing risk management to Western lenders, said Parks.

“Beijing is trying to de-risk the BRI,” he said.

Margherita Stancati in Rome and Chun Han Wong in Singapore contributed to this article.

Write to Jason Douglas at

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