How China’s Belt and Road Initiative Is Changing After a Decade of Big Projects and Big Loans

China’s Belt and Road Initiative is set to become smaller and greener after a decade of massive projects that boosted trade but left huge debts and raised environmental concerns.

The change comes as leaders from around the developing world descend on Beijing this week for a government-organized forum known as BRI for short.

The initiative has built power plants, roads, railways and ports around the world and deepened China’s ties with countries in Africa, Asia, Latin America and the Middle East. It is a key part of Chinese President Xi Jinping’s push for China to play a bigger role in global affairs.

Called „One Belt, One Road” in Chinese, the Belt and Road Initiative was launched as a program for Chinese companies to build transportation, energy and other infrastructure overseas through China Development Bank loans.

The goal was to develop trade and economy by improving China’s connections with the rest of the world in a 21st century version of the Silk Road trade routes from China to the Middle East and Europe.

During his visit to Kazakhstan and Indonesia in 2013, Mr. Xi publicized the idea so widely that it took shape in the years that followed, leading to the construction of major projects, from railroads in Kenya and Laos to power plants in Pakistan and Indonesia.

A total of 152 countries have signed up to the BRI agreement with China, although western European country Italy is expected to drop out when it comes up for renewal in March next year.

As the trade deficit with China has doubled since Italy’s accession in 2019, „Italy suffered a net loss,” said Alessia Amigini, an analyst at Italian think tank ISPI.

Along with the World Bank, China became a major financier of development projects under the BRI. The Chinese government says the initiative has „galvanized” more than 3,000 projects and nearly $1 trillion in investment.

After coming under fire for the impact large building projects can have on the environment and local communities, China has filled the gap as other lenders have shifted to areas like health and education and pulled away from infrastructure, said Kevin Gallagher, director of Boston University Global. Center for Development Policy.

Chinese-funded projects have faced similar criticism, from displacing populations to adding tons of climate-changing greenhouse gases to the atmosphere.

Chinese development banks lent money to BRI projects, and some governments were unable to repay them.

This has led to accusations by the US, India and others that China is engaging in „debt trap” diplomacy: making loans that governments know they will default on, allowing Chinese interests to control assets. An oft-cited example is the lease of a Sri Lankan port to a Chinese company for 99 years.

Many economists say China is not intentionally issuing bad loans. Now, having learned the hard way through defaults, China’s development banks are pulling back. Chinese development loans have slumped in recent years as banks become more cautious about lending and many recipients are less able to borrow.

Chinese loans are a major contributor to the huge debt burdens weighing down economies in countries such as Zambia and Pakistan. Sri Lanka said last week it had reached an agreement with the Export-Import Bank of China on key terms and principles to restructure its debt as it tries to recover from an economic crisis that toppled the government last year.

Future BRI projects will not only be smaller and greener, but will also rely more on investment from Chinese companies than on development loans to governments.

Christophe Nedobile, director of the Asia Institute at Griffith University in Australia, believes China will undertake some more big projects, including railways and oil and gas pipelines. Investment.

A recent example is the launch of a Chinese high-speed train in Indonesia to great fanfare in both countries.

On the climate front, China has pledged to stop building coal-fired power plants overseas, although it is involved in some, and is promoting projects related to the green transition, Mr. Nedobile said. These range from wind and solar farms to factories for electric vehicle batteries, such as a massive lithium-ion battery plant in BRI-partner Hungary that has sparked environmental concerns.