Has China’s Belt and Road Initiative Failed?

Posted on 5 Aug at 1:28 pm

Has China’s Belt and Road Initiative Failed?

By Oliver Carpenter

Over the past decade, much has been made of China’s ambitious “Belt and Road Initiative” (BRI), a global economic strategy of investment and development mostly in economically developing nations that aimed to be the 21st century’s answer to the Marshall Plan. According to the key findings in Griffith University’s 2023 investment report on the initiative, the BRI has now reached the 1 trillion dollar mark in total investment. In 2023 alone, the BRI has completed 212 deals worth 92.4 billion dollars and has grown to its largest size ever with the Green Finance and Development Centre reporting that over 140 countries in some way are receiving investment from Beijing as part of it.

However, despite its massive size and scope, what does the Chinese state have to show for its efforts? A trillion-dollar bill and not a lot else. It might seem presumptuous or even naive to call an initiative of this size a failure, however, when we start to examine China’s wider geopolitical goals in pushing the BRI, the cracks begin to show.

What are the BRI’s goals?

The BRI, Xi’s “flagship” project has aimed to achieve a swathe of political and economic goals for the Chinese state. The first major goal is to grow China economically by securing a “silk road” of natural wealth that can be delivered back to China, the proof of which exists in Chinese mining operations in Africa for oil, gas, and precious metals. The second major goal is to secure debt trap diplomacy for countries that entered into predatory money lending practices at the hands of the Chinese state. The biggest example of this is Sri Lanka, which defaulted on its loans to China and had to give up a strategic port as collateral. The final overarching goal would be to grow Chinese influence abroad and eventually internationalize the Yuan, toppling the dollar.

In theory, China always wins in this scenario. It invests huge amounts of money into large infrastructure projects, and those who can pay back the loans are grateful for the investment. Those who can not or will not have to kowtow to Beijing, all whilst China continues to enrich itself. However, it’s not quite that simple. The BRI is a huge and unruly beast, it simply could never have the level of cohesion and Chinese oversight that Beijing wants. Hong Zhang, a Chinese policy expert at Harvard, stated “A lot of things were happening in the name of Belt and Road,” she said, adding:

Beijing has little control over things going on on the ground.

Corruption, Inefficiency and COVID-19

Inefficiency within many projects stems from massive corruption, undermining China’s goal to curry favor with economically developing nations, as they end up with expensive infrastructure projects that do not fulfill their potential. One example would be the dry port in Khorgos Kazakhstan, according to Voices of America, which states Kazakhstani elites have skimmed millions of dollars off the top through hidden tariffs on Chinese imports.

The COVID-19 pandemic has failed to help matters, as its impacts are still being felt economically across the globe including in China itself. Covid has acted as a sedative for the Chinese economy when growth fell to just 2.2% in 2020 instead of its traditional 6% which naturally slowed investments abroad, according to the China Research Centre. However, Chinese GDP was still growing, unlike the G7 countries which were seeing their GDPs shrank by 2-10% during this time, according to Statista. Cracks are beginning to appear in the Chinese economy, such as the property crisis that hit in 2020 showing that China is not immune from economic shocks like Covid. The number of BRI projects has stagnated since 2020, despite the appetite for overseas investment increasing in China among private companies during this time as reported by the Council on Foreign Relations.

The Problem with Debt-trap Diplomacy

On top of this, countries may be beginning to realize Beijing’s goals through predatory lending. Debt trap diplomacy in and of itself is bound to make nations wary of “free” Chinese investment in their countries. One-third of Pakistan’s national debt is owed to China, with protests over Beijing’s investment in the country. Throw COVID-19’s economic difficulties onto countries that are already paying loans with high interest rates, and it’s no wonder that China’s global charm offensive has lost its charm within those nations. 2023 saw Zambia having to restructure its debt as a result of economic difficulties stemming from the pandemic. Zambia is one of the BRI’s largest investments with China acting as Zambia’s largest creditor. Michael Kugelman, the deputy director of the Asia program at the Wilson Center and the writer of Foreign Policy’s South Asia Brief, said.

I think that many, many countries have realized that they simply don’t have the luxury of an economic structure that can withstand the type of loans that have been coming in from China for so long.

The country going into debt then must make a trade-off between the long-term potential of economic prosperity that can come with infrastructure building and the increased economic oversight of Beijing. It is an innate risk and some countries find themselves losing that trade-off, with decision-makers perhaps overestimating the possibilities of economic development and underestimating the financial constraints. Assuming that these nation’s leaders are acting in good faith. It could be just as likely that leaders believe investing in a large infrastructure project can give them considerable political capital or even provide a legacy. There are often substantial economic rewards for these leaders, regardless of how the decisions affect their citizens.

Changing Governments and Political Upheaval

The nature of international relations with other countries, especially economically, is fickle. China may have been able to secure deals with over 140 countries, but that means over 140 relationships to carefully manage and 140 governments to work with. This is a truly monumental exercise in government communications, international relations, and bureaucracy. The Ministry of Foreign Affairs handles the implementation of foreign policy and international relations, with China’s consulates, its International Liaison Department, and its Central Foreign Affairs Commission also involved. This was even before China’s state-run economic organizations, the media, intelligence services, and the PLA could all get involved in speaking to foreign governments.

Crucially, many of the countries that China has been investing in are either a form of democracy or are relatively unstable and prone to regime change. China invests in 44 countries in sub-Saharan Africa as part of the BRI. With 5 coup d’etat in Africa since 2021 alone and with elections looming all over the world, what was once a friendly nation to China willing to cooperate economically with them might suddenly not be so forthcoming. This doesn’t affect Chinese loans already agreed and paid, but it could affect future investment and cooperation, as well as nations’ views on China as a lender. The very nature of other countries being unlike China and having fluctuating political systems and national interests that change undercuts China’s overarching goal of increasing its influence. Countries that have bad BRI experiences are going to cause that influence to decline rather than grow.

The BRI: A Strategic Failure

As a result of these factors, China has failed to make a lasting pro-China impact on nations across the world through the BRI. The goal of internationalizing the Yuan and toppling the dollar as the global hegemonic currency is far from being achieved. On a smaller scale, China may have been able to curry favor with countries, use them for influence, and secure some infrastructure. It has been able to successfully gather natural resources for use in Chinese manufacturing hubs, but these are paltry achievements compared to the overarching strategic goal of the BRI. The international order is intact, the US and the dollar are still king. China can settle for these lesser economic and geopolitical victories and one could argue it has made in-roads in this area. Whilst the dollar is still on top, it’s not quite in the dominant position it was. But this is not enough for over a trillion dollars in investment spent and China has very little to show for the BRI, with the return on their investment mostly consisting of defaulted loans, corruption, and inefficiency that it can’t curtail, all made worse by the global pandemic that originated from within China’s borders. For this reason, it makes sense to call the Belt and Road Initiative a strategic geopolitical failure in a wider global context.