China Hasn’t Given Up on the Belt and Road Initiative

In the decade since Chinese leader Xi Jinping announced the Belt and Road Initiative, Beijing’s huge infrastructure and investment program has become a defining part of its foreign policy. In the BRI’s early years, dozens of emerging economies in Africa, Asia, and Latin America embraced the program, driven in large part by Beijing’s no-questions-asked approach to lending for megaprojects such as container ports, railway networks, and large-scale dams, and its seemingly limitless financial firepower. Washington and its democratic partners were shocked by the lending spree. There was widespread concern that Beijing was financially supporting authoritarians while saddled countries with unaffordable loans.

However, the BRI lending surge has fallen off the radar quite quickly. China’s overseas infrastructure lending is now a fraction of what it was five years ago, driven down by the country’s domestic economic woes, by Beijing’s drastic (and widely underappreciated) 2016­–17 retooling of its regulations for overseas investment, and by a series of high-profile BRI failures in countries from Ecuador to Sri Lanka. Beijing is not giving up on Belt and Road—far from it. But today, the BRI of the popular imagination—a dominant, globe-spanning infrastructure lending project aimed at cementing China’s power—is effectively dead. Instead, there is a simpler, cheaper model of engagement. It focuses on cultivating more organic ties in fields like trade, telecommunications and green energy.

Both emerging and developed economies need to take notice of the concerns of policymakers. Leaders in the global South need to seek new ahref=”https://www.foreignaffairs.com/articles/china/2022-06-09/chinas-southern-strategy”>financing China should be cautious, as Beijing is becoming increasingly dangerous. Signing up is unlikely Fund large infrastructure projects. The United States and its industrialized partners will have to contend with a shifting paradigm of Chinese influence—one that is moving away from infrastructure megaprojects toward more diffuse, more sustainable engagement. And both groups will need to work together to address the legacy of Beijing’s lending spree, which has fueled corruption, encouraged antidemocratic practices, and saddled recipient states with enormous debts.

Faced with China’s morphing influence campaign, the United States and its industrialized partners have a twofold challenge. To meet infrastructure demand, they must revise their development strategies. democratic accountability across the developing world, but they must also help partners in the developing world cope with Beijing’s revamped approach. As China Beijing faces growing demographic and economic headwinds and is learning from its mistakes. China’s revamped BRI will pose new challenges to policymakers seeking to respond to China’s expansive economic reach—and its power to deepen democratic backsliding across much of the world.

THE RISE AND FALL OF BEIJING’S MEGA-LENDING

Analysts from all over the world praised the Belt and Road Initiative when it was first launched. “transformative” And “potentially game-changing.” Early numbers of Chinese international lending seem to support this view. According to AidData Research lab, during the first five years of the BRI, China’s overseas development spending averaged more than double the equivalent U.S. expenditures, peaking at an incredible $120 billion in 2016. Beijing’s lending program found an immediate audience because it targeted a genuine and pressing problem: numerous developing countries urgently need large-scale transport and energy infrastructure but are held back by price tags that routinely run into multiple trillions of dollars. Traditional development lenders like the International Monetary Fund or the World Bank frequently provide loans to developing nations with conditions that are too burdensome, or even abusive for the borrowers. By contrast, Beijing’s no-strings-attached loans have been lauded by leaders seeking more flexible forms of financing.

But China’s infrastructure investment nonetheless came at a price. As research by the International Republican Institute (IRI) and others has shown, authoritarian-leaning leaders have used the BRI not only to fund infrastructure projects but also as a financial backstop for their worst antidemocratic impulses, secure in the knowledge that they could pursue authoritarian policies without endangering Beijing’s financial support. China offered assistance to Najib Razak, the Malaysian Prime Minster, in 2016, as he was at the heart of a growing corruption scandal. Spying on critics of BRI projects within his own government—an offer allegedly approved by Xi himself.

The popular imagination has effectively ended the BRI.

In fact, the prospect of large-scale financial support from China appears to have emboldened would-be authoritarians around the world—a dynamic that Beijing has encouraged. IRI’s research, for instance, has documented how Beijing routinely dangles the prospect of lending to cement ties with Salvadoran President Nayib Bukele, who has led an assault on El Salvador’s democratic institutions since ascending to the country’s presidency in 2019. A similar dynamic appears to be playing out in the Solomon Islands, where President Manasseh Sogavare recently moved to alter the country’s constitution to extend his rule, backstopped by the prospect of ongoing support.

Many aspiring autocrats still believe Beijing will open its coffers to them. But, this support is not guaranteed. A variety of data sources show that BRI financial promises have drastically slowed. According to Boston University’s Global Development Policy Center, China’s sovereign lending commitments dropped by a whopping 94 percent from 2016 to 2019, from $75 billion to only $3.9 billion. The drop in sovereign lending commitments to China was confirmed by other global and regional datasets. Partial information from 2020 and 2021 suggests that the COVID-19 pandemic may have pared down China’s lending even further: another Boston University database that focused on BRI investment in Africa, for example, indicates that in 2020, China’s lending to African governments dropped to its lowest level since 2004.  

However, this drop in lending that began as early 2017 cannot be attributed to economic chaos. COVID-19. It is a result of a complex mixture of mutually strengthening factors from both within and outside China. These factors make it highly unlikely that Beijing will try to revive BRI infrastructure loans at their previous levels anytime soon.

Failing is not too big

The BRI’s large-scale lending program has slumped partly because of growing headwinds, the most obvious of which are the initiative’s own high-profile failures. In many cases, Beijing simply overestimated the ability of its infrastructure-centered development approach to thrive on foreign soil. From 2007 to 2014, for instance, China loaned Sri Lanka $1.5 billion to build a port and airport at Hambantota—both of which continue Sit largely empty nearly a decade later. Sri Lanka’s economy continues to suffer from the debt it racked up during this period, and China looks Set to be a spoiler Colombo could receive much-needed relief by entering into an agreement with the IMF, and other international creditors. The leaders of countries that were ravaged by the BRI megaprojects and their resulting disasters are now cautious about signing up to another round of loans. In this context, enthusiasm for Chinese investment initiatives has fallen.

But many observers overlook other factors, such as political and economic developments in China, that played a much larger role in the slowdown in lending. Most important was a 2016–17 top-to-bottom overhaul by China’s economic regulators of the rules that govern and authorize large overseas investment and lending projects, with the express purpose of dramatically reducing the number and size of overseas megaprojects. Regulators took this step in part because the surge of capital outflows at the BRI’s peak was destabilizing China’s broader macroeconomic stability. In Beijing, the BRI was increasingly associated with illegal capital flight and excessive, hubristic spending abroad. China-based businesses are penalized The BRI label for theme parks The most wealthy countries France, rather than in public infrastructure projects in South Asia and Africa.

China has been able to undertake far fewer large scale lending projects since the regulatory overhaul. Beijing’s effort to clamp down on gargantuan foreign investments, coupled with China’s deteriorating domestic economic situation, suggests that a return to the status quo ante of almost unlimited overseas lending seems unlikely at best. Xi seemed to indicate the shift in a keynote address to African leaders in late 2021, in which he didn’t use the word “infrastructure” You can do it once.

CHINA’S TIGHTENING BELT

Rather than marking the end of the BRI, however, Beijing’s reorientation away from unbridled lending may push the program toward a more sustainable model. Beijing seems to embrace infrastructure megaprojects as it shifts away from them. More organic, less capital-intensive Forms of economic cooperation with developing economies. Research by IRI, and others, has shown that there are many forms of economic cooperation with developing countries. “Belt and Road” Now, the label extends beyond infrastructure to include less flashy and more affordable initiatives in fields like academia, telecommunications and green energy. tuna fishing.

Beijing is transforming the BRI, and it is doing so discreetly and intentionally; neither China’s overall reduction in lending nor the diffusion of the BRI beyond infrastructure is entirely accidental. China’s policymakers and researchers had already noticed that BRI lending reached its peak in 2016 and 2017. already begun to call A BRI that is more tailored to the needs of host countries, more sustainable, and less concentrated on high-profile infrastructure projects.

Beijing has changed the BRI accordingly. It has increased China’s involvement in the think-tank and academic worlds, working to get first dibs on structuring the field of China studies in countries with emerging Sinology programs—such as South Africa—through academic exchanges, grant programs, and Confucius Institutes. Under the BRI’s auspices, China has also expanded its footprint in the media sector throughout the developing world—most notably in AfricaChina’s StarTimes satellite broadcaster has gained market share from both state broadcasting companies as well as private competitors in this region. China’s efforts to bring its technology to the developing world are likewise growing: although Huawei, for instance, has now been largely shut out of industrialized countries’ telecommunications networks, its 4G and 5G business continues to perform strongly in many countries in Africa and South Asia. Investment by China’s state-owned and private companies in green energy and power grids continues to perform well, and Chinese companies and state institutions are stepping up their cooperation with other countries such as Tanzania, Myanmar, and the Solomon Islands in Security, surveillance?, and “governance” training. 

Beijing is not abandoning its quest to gain global influence through economic growth. It has adjusted its strategy—in some cases out of necessity—in more flexible, targeted, and organic directions. China’s party-state continues to try to win the political and economic allegiance of low-income countries around the world—and it has found a cheaper way to do so. Although Beijing’s decision to move away from large infrastructure projects that tend to foster antidemocratic behavior might seem like a blessing to Washington and its partners, it is at best a mixed bag for everyone involved.

A CHANCE OF DEMOCRATIC DEVELOPMENT

China’s reoriented approach offers new opportunities for the United States and its G-7 partners, but to take advantage of them, democratic leaders will need to craft a far more proactive and coordinated development strategy. First, China’s step back from infrastructure has given Washington and its allies a chance to step forward. Critical infrastructure gaps remain throughout the world, and given the mixed results of China’s no-strings-attached financing, leaders—and, more important, voters—across the developing world may be more ready to embrace lending that comes with greater accountability and clearer benchmarks.

Moreover, many of the BRI’s ongoing target areas, such as academia, telecommunications, and trade, are fields in which industrialized democracies are well-positioned to compete. The United States and its democratic partners must invest far more in a shared approach to building ties with countries struggling to keep relations with China on a healthy footing—for example, by promoting trade and business, supporting journalism and academic exchanges, and providing scholarships and technical training. Washington and its partners could also invest in creating a new fund for development and democracy, which would demonstrate a shared desire not only to support developing countries’ physical infrastructure but their democratic infrastructure, as well.

Beijing continues to pursue its goal of global influence via economic development.

The United States must make more efforts to build relationships with smaller countries. China’s ongoing reorientation of the BRI will make these countries more, not less, important to Beijing. Although China may be abandoning multibillion dollar commitments to large emerging economies, smaller commitments can still have a significant impact on countries like the Solomon Islands and Serbia. It has become a cliché in foreign policy circles to say the United States and its partners just need to Focus on showing up—but the truth holds that the unglamorous work of maintaining a presence remains the best way to build the trust and relationships that yield crucial opportunities. 

The United States and its allies should not be afraid to promote democracy alongside development. This is the path that the United States Agency for International Development, alongside its partners, has already begun. Biden administration’s Summit for Democracy, USAID Reiterating the importance To promote healthy democratic institutions long-term development. But too many of the United States’ industrialized partners are hesitant to openly embrace or emphasize the notion that democratic institutions such as independent courts, strong legislatures, a free press, and well-run elections can enable development. Some analysts have long expressed concern that calls for democratization could recall the United States’ own Cold War–era interventions or could alienate countries where leaders are not democratically inclined. These concerns are less valid the more other democracies, major aid donors, can add their voices. While the United States could easily dismiss the benefits of democracy as a result of its Cold War mentality, a coalition of democracies from Canada to Japan would make it much more difficult to ignore.

The sooner policymakers can acknowledge China’s shifting international strategy and reconfigure their own approach, the better. China’s party-state is quickly learning what the United States discovered after its own emergence as a superpower: that changing other societies is a complicated, messy business, and that trying to do it through large infusions of cash can backfire in damaging ways. The most important question for democracy worldwide is how Beijing applies these lessons and whether or not it succeeds in its pursuit to power. It is up to the United States and its democratic partners to develop answers of their own—and to make them as effective as possible.

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