Investment slowdown . . .
According to a recent study by Gavekal Dragonomics, over the last 18 months there has been a slowdown in investment in China’s Belt and Road Initiative (BRI) projects. For example, the value of new projects across 61 countries fell 13% to $US126 billion in 2018, as compared to 2017. Several factors have driven this decline including China’s current account surplus dropping to zero for the first time since 2012; increased caution by Chinese banks surrounding BRI-related loans; and countries fearing becoming both financially and politically indebted to China.
China promoting transparency, sustainability . . .
China’s leadership is well aware of the financial and political challenges of the BRI. In April 2019, President Xi Jinping vowed to ensure the transparency and ‘fiscal sustainability’ of all BRI projects. At the G20 Finance Ministers and Central Bank Governors Meeting in Osaka in June, China endorsed Japan’s proposed principles for ensuring transparency and responsible, sustainable financing for infrastructure projects. And this week, China’s Ministry of Foreign Affairs convened in Beijing the First Session of the Belt and Road Legal Cooperation Research and Training Program, which brought together ambassadors from BRI member countries and Chinese academics. The Program’s goal is to arrive at an understanding on a shared framework of international law among BRI members.
BRI growing pains or serious trouble? . . .
The broad sweep of policy decision-making in China is highly concentrated in the country’s top political leadership. But ministries, banks, and state-owned enterprises often have some leeway to interpret and execute policies in the early stages of major initiatives, leading to identification of best practices and the implementation of firmer project structures. The BRI is no exception, and its most recent challenges could be more growing pains than serious trouble.
- China Global Television Network: Belt & Road regions move forward in creating shared legal framework
- Reuters: World's top economies lay out principles on debt sustainability at G20 meet
- South China Morning Post: China slimming down Belt and Road Initiative as new project value plunges in last 18 months, report shows