Ten years ago, China launched a mega-infrastructure project, with the help of which it offered to finance the construction of roads, ports, railways, airports and industrial facilities in dozens of countries around the world. Many were built, some were useful, while others cost a fortune and left countries heavily indebted to China. Why more people are skeptical about the Belt and Road Initiative (BRI) and how the project will change.

“Ruthless” money from China

In 2013, during a visit to Kazakhstan and Indonesia, Chinese President Xi announced a very large infrastructure project known at the time as the Belt and Road Initiative and later the Belt and Road Initiative (BRI). The summit, which is being held these days in Beijing, marks the tenth anniversary of the BRI.

The idea was that large Chinese companies would build facilities in areas such as transport, telecommunications and energy in dozens of countries around the world, and China would provide loans to these countries through the largest banks. China offered the “whole package” to states that could not get financing from the West.

The project started in 2014 and many things have been built, from railways in Serbia, Indonesia, Kenya and Laos to ports in Sri Lanka and highways in Papua New Guinea. Several dozen countries have received significant investments.

China launched its major companies, with an estimated 3,000 projects completed over a decade with a total investment of nearly $1 trillion. More than 150 countries have registered to participate in the BIS program, including Italy, but not all of these countries have received significant investment.

China specifically chose countries with authoritarian regimes, as well as many states that would never be able to afford to invest hundreds of millions of dollars or even billions in a mega infrastructure project.

China has presented the BRI program as a program that will lead to higher living standards by creating useful goals for the population, but it has been abundantly clear that it is also a project through which China wants to become increasingly influential politically. It was and is a “soft power” project aimed at strengthening Chinese influence in places where the Americans have not invested much.

A poisoned gift? What critics say about the BRI

Some leaders of the countries to which China gave loans were pleased that they came with fewer restrictions than if the money had come from the West, restrictions related to respect for human rights and environmental protection.

The most controversial aspect of the BRI has been what the British call the “debt trap,” meaning that small and poor countries are unable to repay debts owed to China resulting from investments in the BRI project. The consequence of this was that in these over-indebted states, China will influence the policy of the country to which it is “sold debt”.

Another criticism is that not all the projects were really useful and are examples of overpriced airports, railways that will never make money, and ports that did not have many passengers even after they were expanded and renovated. Obviously, this is also about the management of the investment by the authorities of the respective country.

They also criticized the average manager: some projects destroyed beautiful areas, other investments were made by displacing large numbers of people. A criticism that was met with in several cases was that these projects were not designed “with the head” because there was no real need for them, especially in poor countries where there were other priorities.

Another criticism of some investments is the poor build quality, but this was not a common complaint.

It is not known how much money was borrowed from the Chinese for projects in dozens of countries, but an analysis by Boston University’s Center for Global Development Policy shows that China’s two largest banks provided more than $330 billion in loans over nine years. . The most productive year was 2016, the weakest – 2021. In general, the amount was much larger.

Some have said that China maliciously gave loans to countries that it clearly could not repay, specifically so that Chinese PRs could take over the assets of those companies, a famous example being a port in Sri Lanka. Most economists, however, say that China probably did not come with bad intentions and that there were enough situations where sufficient calculations and risk analysis were not done.

In the early years of the BRI project, China was the largest source of loans in the world, but over the years it also became the largest collector of debt, but the debt continued to grow. In many cases, the Chinese agreed to the installments of debts, but not to their complete write-off.

How BRI is changing – More caution, smaller projects

China’s approach to the BRI has changed over the past three years and will continue to change. China finances smaller projects, is also more environmentally conscious, and the projects it will invest in are chosen more carefully. China wants to take less risks and no longer encourages “pharaonic” projects outside its borders.

In 2021, the XI President called for giving priority to “small and beautiful” projects that would be attractive to the local population. Xi also said that the People’s Republic of China will no longer finance the construction of coal-fired power plants abroad.

The BRI approach has changed mainly because China has more and more problems: the economy is not growing as before, there is also a real estate crisis, and some sectors of the economy have not recovered from Covid.

Even the big Chinese banks were no longer satisfied with the situation when the debts accumulated by various countries were increasing and the chances of their return were decreasing.

Sources: CNN, CNBC, New York Times, AP