In 2023, China will mark the tenth anniversary of its flagship Belt and Road Initiative (BRI), the billion-dollar push to fund roads, ports and other critical infrastructure around the world. Ahead of this anniversary, it is important to pause and reflect on the significance and trends of China’s international finance on the global economy.
When the effectiveness of a policy is being evaluated, the origins must be considered to understand the motivation. The year 2012 reveals a great deal about the start of the BRI and what it has accomplished in the last decade. In 2012, China’s strategic, diplomatic and economic relations with the world were deeply troubled. Strategically, its territorial and military conflicts in the South China Sea and the East China Sea were very salient. Thus, implementing the BRI was part of a strategic “China Goes West” proposal to de-escalate head-on conflicts in maritime Asia by intensifying connectivity on Eurasian land. China also faced America’s growing economic reach with the negotiation of the Trans-Pacific Partnership (TPP) (though it has since been scrapped). Unlike the current Indo-Pacific Economic Framework, TPP spelled out high standards and open market access. On top of these external pressures, industrial overcapacity and environmental pollution were severe in China, and the local economy was on the verge of collapsing.
The BRI’s main accomplishment was to provide a cohesive and permissive environment for state agencies and businesses to search for a way out. The diverse BRI projects and messages demonstrate that China’s solutions to these economic problems have been varied. Not all of them have been effective.
However, data indicates the BRI strategy has been largely successful. For example, as of 2021, China has signed Memorandums-of-Understanding (MOUs) with 140 countries and 32 international organizations, among which 46 are in Africa, 37 in Asia, 27 in Europe, 11 in North America, 11 in the Pacific and eight in Latin America. Additionally, in 2012, China’s outbound foreign direct investment (FDI) was $82 billion, but in 2020, it was $154 billion, ranked as the world’s number one overseas investor. The increase in Chinese investment in BRI countries has also been impressive.
In addition, China has clarified and strengthened BRI guidelines likely to shape future implementation of BRI projects. For example, the political leadership has called for the BRI to move from vision to action, and future BRI projects to conform to “green and sustainable development.” The state has also spelled out three missions for the BRI going forward:
Growth-promoting: sharing China’s development experience; linking up with other national economies; enhancing the long-term foundation for world development.
Re-globalization: Rebalancing maritime and land globalization; rebuilding a more inclusive and equitable global economy; de-Westernization (de-centralizing).
New regionalism: Economic corridors and belts, in contrast to conventional economic unions and zones.
Finally, as the BRI approaches ten years of age, its integration with domestic priorities has become more systematic. Among the corridors, the land-based BRI is tightly connected to Xinjiang’s development and western China’s globalization. The sea-based BRI ties closely with the Greater Bay strategy surrounding Hong Kong and the maritime expansion of eastern China. Furthermore, China’s state-owned enterprises (SOEs) are expanding their investment and operation in the green economy, digital infrastructure, construction industries and railways.
Given this success, is China likely to dominate the world economy in the coming years?
In short, no, China is not going to dominate the world. US capital, multilateral institutions and European investors have more strength, prestige and networks worldwide than their Chinese counterparts. Western loans and investments are still preferred to China’s, whether in Europe, Africa or Asia. In addition, the US and its allies, such as the European Union (EU), Japan and South Korea, have technological strength, developed economies and sustainable infrastructure. Together, they offer a competitive advantage to China’s BRI and evidence that China’s economic presence has been exaggerated.
Similarly, the US-led economic order and democracy have deep roots around the globe. China’s endeavor to undercut this global ideology is likely to be futile. The Chinese cultural, social and economic system is not easily learnable and adoptable elsewhere.
However, the BRI does show specific strength in Chinese capitalism going global. Notably, the coordination among state bureaucracy and businesses is highly effective. Moreover, China’s SOEs can comprehensively develop infrastructure, livelihood projects, workers’ training, medical and health supplies and community building. Nevertheless, this strength can also be a weakness. Fusing actors and interlinkages among projects make transparency and accountability very difficult.
Is the success of the BRI a win for China, or the world? Who then are the winners and losers?
Although criticism is censored in China, the support for the BRI is not unanimous or universal. Parts of society are concerned about its impact on intensifying China-US competition, or wastefulness in the BRI’s investment and infrastructure.
But the BRI has benefited core political groups in China, including local governments investing in globalization and growth, businesses expanding abroad with state financing, national agencies utilizing BRI platforms and scholarly communities gaining exposure, experience and expertise in understanding the world.
Outside China, BRI host countries, to varying extent, have received considerable investment, infrastructure and loans. Even when projects have defaulted or been put on pause, host countries can learn valuable lessons and gain precious experience in infrastructure development and engagement with Chinese capital.
However, the BRI is not a miracle. It cannot transform places not yet on the verge of taking off. Nor can it fully solve China’s challenges domestically and globally. Nevertheless, it has been an integral part of the global political economy over the past ten years and is likely to continue in the future.
By Min Ye, Global Development Policy Centre
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