Amid changing geopolitics due to the Ukraine war and COVID-19 pandemic, China has slowed down its investments in the Belt and Road Initiative (BRI). The uncertainty created by China’s COVID-19 lockdowns has not only moderated China’s growth projections but also global investments.
All of these have increased financing risks considerably, particularly in emerging markets that are facing a triple crisis of inflation (particularly relevant in food, fuel), exchange rate risks, and sovereign debt risks, reported European Times. According to a study by the Green Finance & Development Center; an affiliate of Fudan University, China’s Belt and Road financing and investments, in the participating 147 countries of BRI fell in the first half of 2022.
During the period financing and investments were recorded at USD 28.4 billion, compared with USD 29.4 billion in the same period a year earlier. The first-half figures were 40 per cent lower compared with the same period in 2019, reported European Times. In addition, in the first six months, no new spending occurred in Russia, Sri Lanka and Egypt. The declining trends in BRI investments are likely to continue in the second half of 2022 as well due to both China’s own economic challenges as well as global uncertainty.
About USD 11.8 billion went toward investments and USD 16.5 billion went to construction contracts partly financed by Chinese loans. No coal projects received financing or investments in the first half of 2022. Meanwhile, China’s commitment to further reduce carbon emissions do not auger well with the data set as green energy total engagement (solar, wind, hydro) in the first half of 2022 dropped by 22% compared to the first half of 2021 to about USD 3 billion.
Also, despite the drumbeating by China, average deal size for construction projects is getting smaller, dropping from USD 558 million in 2021 to USD 325 million in the first half of 2022, reported European Times. In view of the grim economic situation at home, Chinese BRI engagement is expected to reach at the levels that were in 2018-2019. There is also a recognition of the Chinese Ministry of Commerce (MOFCOM), which put a break on fast overseas expansion in its 14th Five-Year Plan (FYP) for 2021 to 2025: it plans for China to invest USD 550 billion (that includes non-BRI countries), down 25 per cent from USD 740 billion in the 2016-2020 period.
Also, Chinese contracting volume is planned to decrease from USD 800 billion in the previous FYP to USD 700 billion in this FYP. It is also observed that in recent years, China has become more risk averse with regard to its BRI projects given its own domestic economic challenges and increasing backlash against the BRI in many host countries. Like all infrastructure projects elsewhere, progress under the BRI has considerably slowed due to the pandemic. And the recipient countries, for many of whom the priorities now stand shifted to health services and health infrastructure, have already begun to clamor for relaxation of debt repayment terms.
Some countries are scaling down or scrapping entire projects that are part of China’s Belt and Road Initiative amid mounting financial concerns over the continent-spanning venture. In developing nations such as Pakistan, Malaysia, Myanmar, Bangladesh and Sierra Leone; they have cancelled or backed away from previously negotiated BRI commitments, citing worries over high project costs and their impact on national debt and the economy, reported European Times.
Moreover, BRI is facing several challenges, especially the lack of trust. Allegations against China for colonial and exploitative intents behind BRI persist widely. China is alleged to exploit disproportionate leverage over certain economically weaker partners in bilateral negotiations pertaining to BRI projects. Many governments and analysts express concern about debt-trap diplomacy, a predatory lending practice in which China deliberately provides loans to desperate countries that may not be able to repay them, demanding political or economic concessions when the debt becomes unsustainable.
As a major claimant of geopolitical power, it is also alleged that under the BRI China is intending to expand its naval and military bases. Many of BRI projects lie at the centre of major corruption scandals in the host countries. It is also alleged that BRI projects do not benefit local workers as much as they should. For instance, infrastructure projects in Laos, Myanmar and Pakistan have been built primarily by imported Chinese labour. Besides, delay in implementation and cost over runs in the BRI projects is frequently observed.
For example, the BRI agreement signed between Nepal and China has crossed the five-year mark, however, the projects under the initiative are nowhere to be seen on the horizon, reported European Times. Nevertheless, now there are several ongoing efforts to fill that space including Quad, Build Back Better World, G-7 and EU initiatives to fund infrastructure development in developing countries. (ANI)
(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)