Since announcing its Belt and Road Initiative five years ago, China has spread billions of dollars around Asia, Africa, and Eastern Europe, supporting a variety of infrastructure projects and stoking concern about Beijings growing global sway.
But China appears to be pumping the brakes on lavish BRI-related spending, and it could be a sign its worried about the scale of its commitments.
The Chinese government itself does not have a comprehensive picture of the investments involved, and sources close to Chinese economic policymaking told The New York Times in June that Beijing has started a sweeping review to determine the number of deals that have been signed, what their terms are, and with whom theyve been made.
Official Chinese data also indicates that BRI spending is down, amounting to contracts worth $36.2 billion signed during the first five months of 2018 – 6 per cent less than during the same period in 2017.
Such activity was also down during the first five months of 2017 compared to the same period of 2016, and official figures show that Chinese firms are still finishing projects at close to the same rate that theyre signing onto new ones, indicating the BRI push may just be falling into a more normal rhythm.
Concrete numbers for BRI projects are hard to pin down, according to Jonathan Hillman, a fellow at the Center for International and Strategic Studies in Washington, DC, but the decline reflected in the figures cited by The Times could be driven by several factors emerging both at home and abroad.
While the slowdown may reflect that “the lowest hanging fruit has been picked,” leaving only riskier projects, it could also be caused by “concerns among potential borrowers,” said Hillman, who runs CSIS Reconnecting Asia Project.
“Sri Lankas experience has become a cautionary tale,” he added, referring to a development deal undertaken with Chinese financing that Colombo struggled to pay back, leading it to offer China a 99-year lease to operate the strategically valuable port of Hambantota.
“In Malaysia, the Maldives, Pakistan, and elsewhere, opposition parties are tapping into concerns about Chinese lending. EU leaders have become more vocal, too,” Hillman said.
IMF chief Christine Legarde has cautioned China and its foreign partners about the potential for mounting debts. US officials have been more pointed. Navy Secretary Richard V. Spenser described Chinese lending as “weaponizing capital” and told lawmakers earlier this year that the trend kept him up at night.
The countries signing on to BRIrelated deals are typically more vulnerable to the risks associated with them, Hillman added, as the loans are often made in currencies they cant control, like the US dollar or Chinas renminbi.
“As historically low interest rates rise, BRI borrowers could be caught between mushrooming payments and an unforgiving lender,” Hillman said.
China has made long-term loans, often to countries with natural resources or other assets that could be used to repay them, a factor that has led critics to call the initiative “debttrap diplomacy.”
But Beijing and its BRI partners are likely “mutually vulnerable,” Herve Lemahieu, director of the Asian Power and Diplomacy Program at Lowy Institute in Australia, said in May interview.
“At the end of the day, the countries that benefit from financing and loans from China can also default on those loans, and that would put China in a more risky economic position,” Lemahieu added.
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