2023-10-17 20:43:17
When President Xi Jinping brought together world leaders for the first time in 2017 to outline his vision for expanding Chinese soft power through a mega trade and infrastructure investment initiative, he called the Belt and Road (BRI) project and Road Initiative in English) or Silk Road, in an allusion to China’s economic power in past centuries until the mid-19th century.
In 2017, China was at its peak as the world’s second economic power and, according to most analysts, was on track to overtake the United States economy within two decades.
Today, October 17, 2023, China hosts the third BRI Forum in a completely different context.
The future of the initiative seems uncertain. Although the project attracted billions of dollars in its first decade, and more than 145 countries have joined the initiative, representing 75% of the world’s population and more than half of global GDP, momentum has slowed in recent years.
China’s overall activity in BRI countries is down about 40% from its 2018 peak as the world’s second-largest economy slows. Beijing faces accusations of being an irresponsible lender that drives countries into default. Broken ties with the United States have made association with the Chinese project increasingly controversial – Italy, the only member of the Group of Seven, is expected to leave by the end of the year.
The participation of world leaders is much lower than in the past. The spotlight is focused on the participation of the President of Russia, Vladimir Putin, who arrived in Beijing this morning. On the European Union side, the only leader present is the Prime Minister of Hungary, Viktor Orban. The other leaders come from the so-called Global South.
The Covid outbreak has put the brakes on China’s trade and infrastructure drive as a global slowdown has imperiled debtors’ ability to repay their loans. Zambia was the first African country to default during the pandemic in late 2020, putting China, the country’s biggest creditor, in the spotlight.
As other nations, including Ethiopia, Sri Lanka and Pakistan, fell into debt crises, annual BRI involvement dropped to $63.7 billion in the first year of the global health crisis, compared with peaking at more than US$120 billion in 2018.
This decline was sustained by geopolitical tensions and internal problems plaguing China’s economy, which show little sign of abating.
External shocks such as the war in Ukraine and, perhaps in the coming weeks, the new war in the Middle East, are deepening the burden of debt and inflation.
But the most important shock came from political tensions and economic competition between China and the United States. The United States clearly intends to block China’s path to economic hegemony. The European Union maintains a softer position, preferring to talk about risk containment and not disengagement from China. But the result is the same: the fragmentation of globalization.
China has responded by shifting to so-called “smaller prettier” projects that benefit people’s livelihoods. The state-run People’s Daily this month cited a water treatment plant in Botswana modernized by a Chinese company and a technology partnership with a seed company in Costa Rica as examples.
The average BRI investment deal declined 48% from the 2018 peak to about $392 million in the first half of this year. The report tracks both the value of construction projects financed by China and those in which Chinese companies have equity stakes.
China’s private companies are also becoming more active in a space once dominated by political banks and state-owned enterprises.
The geographic focus of the strategy has also evolved in line with China’s foreign policy. Saudi Arabia was one of the top three recipients of BRI loans this year as the Chinese leader seeks to expand his influence in the Middle East.
Another major challenge for China is to preserve its image among countries in the so-called Global South, mainly African countries. For nations in the Global South, China’s efforts to present its country as a leader in the developing world have been a vital source of financing. China provided $114 billion in development financing to Africa alone, from 2013 to 2021.
This spending has encouraged governments in the United States and Europe to expand engagement with some developing countries to counter China’s influence. But although Western rivals have pledged billions of dollars, many of their projects have been slow to get off the ground. In less than two decades, China has become the benchmark for partnership for the development of many African countries.
The BRI is based on the assumption, which is true, that economic and trade relations between countries create mutual benefits and that the resulting growth would allow countries to meet their debt burdens.
Today the situation has changed. Global inflation, widespread interest rate increases and the growing burden of external debt in many African countries have exposed the limits of the Chinese partnership model. China enters unfamiliar territory: development aid.
But even with the slower pace of BRI investments, China remains an important partner for African countries. We have already said here several times that in today’s multipolar world, African countries do not have to choose between the various geoeconomic blocs. The United States, Europe, China, Japan, India and Brazil, among others, represent important economic hubs for African countries.
José Correia Nunes
Executive Director Portal de Angola
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