The BRI at Ten: Maximizing the Benefits and Minimizing the Risks of China’s Belt and Road Initiative
To mark the tenth anniversary of China’s historic Belt and Road Initiative (BRI), the third Belt and Road Forum for International Cooperation (BRF) will be held in Beijing in mid-October, with several international leaders scheduled to attend.
The BRI is an ambitious global infrastructure platform to expand connectivity, economic integration, growth and cooperation across the globe. Over the last ten years, what has been the impact of the BRI on the global economy and how has the initiative impacted host countries and China alike?
A new flagship report by Kevin P. Gallagher, William Kring, Rebecca Ray, Oyintarelado Moses, Cecilia Springer, Lin Zhu and Yan Wang evaluates the promise of China’s overseas economic activity in general, and the BRI in particular, finding that the BRI has delivered significant benefits to host countries, but has also accentuated real risks for China and host countries alike.
- New, additional resources for the Global South: From 2008-2021, China’s development finance institutions (DFIs) provided approximately $500 billion, and at least $331 billion during the BRI period of 2013-2021. In Africa, Chinese DFI financing stood at $123 billion from 2008-2021, and $91 billion during BRI years. In addition, Chinese commercial and other actors provided $30 billion to African governments from 2008-2021, and $23 billion during the BRI period.
- Significant economic growth: Chinese overseas development finance has been much more focused on industrial and infrastructure lending, compared to traditional DFIs like the World Bank, which tend to focus on institutional capacity building. Chinese finance is thus more associated with economic growth, addressing infrastructure bottlenecks and increased energy access than World Bank lending.
- Co-creation of a new model of South-South cooperation and developing country agency for development: China has been at the forefront of providing financing for liquidity and development finance and creating Southern-led alternative institutions. These institutions increase the role of the South in global economic governance and contribute additional and alternative sources of much needed financing that provide opportunities for developing country agency.
- Accentuated debt distress: Many of the recipients of Chinese finance are subject to significant debt distress, with several countries owing China a significant share of their external debt.
- China has played a constructive role in the G20 Debt Service Suspension Initiative, but creditors remain in gridlock over more substantive debt reduction.
- Increased carbon dioxide emissions and air pollution: China’s overseas fleet of fossil-fuel power plants emits around 245 million tons of carbon dioxide per year, contributing to climate change. China’s overseas infrastructure also contributes to land use change that causes further greenhouse gas emissions and poses risks to biodiversity and Indigenous lands.
- In 2021, China pledged to shift from fossil fuel investments to stepping up clean energy development in future investment.
- Risks to biodiversity and Indigenous lands: Chinese development finance projects carry significantly higher risks to biodiversity and to Indigenous lands than projects financed by the World Bank. These differences are not simply due to differences in the sectors of projects that each lender supports but hold even with most sectors.
- Recent trends show Chinese development lending shifting toward smaller and less risky projects, as China develops standards for a Green BRI. Furthermore, Chinese investment does not show a preference for operating in contexts with weak standards, so host countries also have policy space to enact and enforce protections that serve their sustainable development goals.
Key policy recommendations for China:
- Shift its focus from a high volume to a high impact level of economic engagement overseas.
- Adapt its current approach to enable new forms of economic cooperation and opportunity for South-South cooperation, such as establishing a new project pipeline facility to match its unique business model.
- Apply new policy frameworks to help prevent and mitigate risk for China and global partners alike.
The resource mobilization needs in the world economy are enormous, and China has made one of the largest contributions to closing that gap over the last decade. As the BRI and China’s global experience have evolved over the last ten years, China and host countries alike have begun to develop several frameworks aimed at maximizing the significant benefits of China’s economic activity and mitigating the attendant risks.Read the Report 阅读中文报告