Chinese President Xi Jinping gathered world leaders at a high-level summit in Beijing on Wednesday to usher in the next phase of his signature Belt and Road Initiative. But in the subtext of Xi’s mostly triumphant opening speech, and in the broader summit, the headwinds facing the sweeping foreign-policy program were clear.
For one, the family photo of the heads of state and government in attendance was emptier this year—only 23 national leaders attended, compared to 37 at the last summit in 2019. The 23 leaders reflected a more divided world. Russian President Vladimir Putin was Xi’s guest of honor at the forum, while the European Union delegation was whittled down to just Hungarian Prime Minister Viktor Orban. Taliban leaders also attended the summit and formally signaled a desire for Afghanistan to join the Initiative, known as BRI. In Xi’s remarks, he alluded to the increasingly fractured landscape. “Ideological confrontation, geopolitical rivalry, and bloc politics are not a choice for us,” he said. “What we stand against are unilateral sanctions, economic coercion and decoupling, and supply chain disruption.”
But despite these tensions, the ravages of the pandemic, the continuing fallout of the global debt crisis, and domestic economic troubles, Xi sent a strong signal that China remains committed to the BRI. It is “the right path forward,” he said during his speech. To underscore this, Xi announced nearly $100 billion in new financing would be available from China’s two main policy banks and nearly $11 billion from the Silk Road Fund, which invests in Belt and Road projects.
These new funds show that China is returning to international financing after the worst of the COVID years, said Rebecca Ray, a senior academic researcher with Boston University’s Global China Initiative. “I don’t think we’re going to see it at the scale we used to see it five years ago,” Ray said, “but I do think we will see a renewed commitment to being present internationally, just in smarter, smaller, and more sustainable ways.”
Why would China extend loans overseas when it is on shaky footing at home? Over the last decade, the BRI has brought some clear benefits for China and the countries it has invested in. Estimates of BRI spending vary (it’s an amorphous label), but scholars typically count any Chinese private or public lending and investment in countries that have signed a BRI memorandum of understanding—150-odd countries—as BRI projects. Under that definition, according to one estimate, BRI activity has surpassed $1 trillion, from the Laos-China Railway to a giant coal power plant in Turkey, since 2013. For recipient countries, China has filled a gap by building and investing in hard infrastructure projects, complementing the World Bank, which has been more focused on public administration lending, according to a recent report from Boston University.
Eric Olander, a longtime observer of Chinese overseas development, recently said on the China-Global South podcast that, compared to other countries and institutions in the development arena, Chinese lenders and companies have an upper hand when it comes to efficiency. “If I was a betting person, I would say I’ll put my money on the Chinese in terms of delivering actual results,” he said.
These roads, bridges, ports, and power plants have brought new economic opportunity. Studies compiled by the Boston University authors suggest that China’s overseas infrastructure projects have helped boost trade and economic growth in developing countries.
The initiative has also benefited China, even if the projects aren’t always lucrative. China’s lending has allowed it to secure critical resources; for instance, China Development Bank has disbursed loans in exchange for oil Venezuela and bauxite in Ghana. Chinese loans have also served up business opportunities for Chinese state-owned companies that have seen business dry up at home—such as in the steel and coal industries. Less tangible, but equally important, the BRI has been a major marketing feat for China. By creating the all-encompassing Belt and Road label, China has brought overseas development, lending, and business under one umbrella, drawing attention from scholars and foreign governments to the scale of China’s presence globally. “If all of this had been bilateral, we probably wouldn’t have paid as much attention,” said Christoph Nedopil Wang, the director of the Griffith Asia Institute who studies the BRI. That image, and the on-the-ground reality of massive projects, has paid dividends diplomatically. In one recent example, Honduras decided to cut its ties with Taiwan this year in favor of China after Taipei failed to deliver development loans that Honduras had requested.
While the BRI has been a boon to China in many ways, the original model wasn’t without problems, and yesterday’s summit reflected China’s efforts to adapt. In the early years, Chinese banks lent huge sums without conducting sufficient due diligence, Ray said, and China is still dealing with the aftermath of that era. Aggravated by COVID, inflation, and the war in Ukraine, the global debt crisis has mired China in extended negotiations with debt-ridden countries at a time when it is also facing a significant economic downturn domestically.
While these debt issues won’t resolve themselves overnight, experts told Foreign Policy that China has become more careful about its lending and much more risk-averse. Since 2016, Chinese banks have tightened their belts, so to speak; lending has fallen significantly. “The original BRI was very much driven by government projects,” Nedopil said, but that’s changed. “Now it is in many ways much more commercially oriented.” In the first half of this year, equity investments dominated BRI activity for the first time, rather than state-backed construction contracts, according to Nedopil’s research. This commercial turn was reflected in Xi’s speech when he referred to projects that are “small yet smart.” Chinese policymakers have repeatedly cited that phrase in recent years, along with “small is beautiful,” to describe the BRI’s new focus on smaller, higher-quality deals.
The other evolution underway along the Belt and Road is the turn toward greener projects. Originally, energy projects dominated China’s overseas lending, and the vast majority were fossil fuel projects. China came under pressure for exporting its coal-heavy growth model abroad even as scientists were sending dire warnings about the climate consequences of new fossil fuel projects. But since Xi announced a ban on overseas coal projects in 2021, China has largely lived up to that promise (although some projects that were already underway before the ban are still proceeding).
When Xi made his 2021 coal announcement, he also said that China would “step up support for other developing countries in developing green and low-carbon energy.” China’s BRI energy investments in the first half of the year were the greenest on record, with 41 percent of activity going toward wind and solar projects. But even though the green share of energy spending has gone up, green spending itself hasn’t risen much. Part of the problem is finding “bankable” projects. When China started the BRI, countries had lists of infrastructure projects ready to go, Ray said, “but there isn’t such a backlog of projects having been developed for renewable energy yet.” China needs to coordinate with other countries and financial institutions to minimize the risks of investing in green energy projects and to give developing countries the technical expertise they need to prepare such projects, said Liu Shuang, the China finance director at the World Resources Institute.
At the summit, China clearly promoted its interest in taking the BRI in a greener direction, but as the initiative enters its next decade, many questions still loom. Will China be able to ramp up its green business abroad the way it has domestically? How quickly will the Chinese policy banks spend that new $180 billion while balancing urgent financing needs at home? And will the Chinese public maintain support for the initiative as its own economic outlook darkens?
“Countries taking the lead in economic development should give a hand to their partners who are yet to catch up,” Xi said in his speech. That message has helped China win friends and influence countries around the world over the past decade; whether the magnanimity lasts another decade remains to be seen.