The Covid-19 pandemic has taken a toll on Chinese President’s Xi Jinping’s ambitious project, Belt Road Initiative (BRI). Reports suggest that China has been asked to cut back on new loans and investments because of its shrinking economy. China has been asked to cut back on new loans and investments because of its shrinking economy
What is China’s Belt Road Initiative?
The belt and road initiative is China’s ambitious plans for economic integration on a massive scale the land belt runs from China through South and Central Asia into Europe. While the maritime road connects coastal Chinese cities with Africa and the Mediterranean the reach is fast to date at least 68 countries and international organizations have signed trade and infrastructure deals with China as part of the initiative together these countries account for up to 40 percent of global GDP a whopping 21 trillion US dollars. Key projects of the belt and road initiative include a 12,000 kilometre railway connecting London and the Chinese city of Yi Liu a highway that connects Kashgar in China’s Far West with Pakistan’s quitter port and
a pipeline from Turkmenistan to China that will eventually pump 55 billion cubic meters of gas a year to Shanghai. Proponents of the belt and road initiatives say such investments and
projects can benefit the whole world and lift billions of people out of poverty but critics say China is using such projects as a means to gain more geopolitical influence.
China’s Shrinking Economy –
The Green Belt and Road Initiative centre organisation observed that Chinese investment reduced to USD 47 Billion in 2020.
Wang Xialong, director-general of China’s International Economic Affairs Department,
“ 20% of the BRI projects were seriously affected. 30-40% of the project witnessed an adverse impact”
According to reports, the lending under the BRI has come down from USD 75 billions in 2016 to USD 3 billion in 2020. During the pandemic, the Chinese economy has slumped drastically.
Issues with the BRI Project –
BRI Project Involved in Many Other Problems :
Lack of financial transparency
Unfair loan conditions
Fears of debt-traps
Negative social and Environmental impacts
In Pakistan, out of the total 122 projects announced under BRI, only 32 could be completed so far. China’s reduced growth rate has forced Beijing to tighten fiscal discipline and work on financial risk. This would also lower China’s prospects of investing more money into the BRI projects.
Rhodium Group, an independent research organization, said that the progress of BRI projects was decelerating even before COVID-19 outbreak. It asserted that in the past three years Chinese investment slowed down in most of the developing world.
Since the inception of the BRI project, China has been wooing developing or poor African and Asian countries through loans and investments. But Covid-19 has caused millions of Chinese businesses to go bankrupt, disrupting the cash flow and making a huge impact on the country’s economy.
Reports suggest that contraction in Chinese lending will widen the overseas lending gap as well
Norton Rose Fulbright, Global Law firm –
“with the sustainability f financing for BRI projects already posing a challenge and Chinese capital expected to be mobilised to first meet its domestic needs, the pandemic as well as its induced economic slowdown will be a further setback and may even sound the death knell of some BRI projects.”
It a difficult situation for China as BRI loanee countries want their loans to be cancelled while Chinese people are against oversea spending.