Is China winding down some Belt and Road Initiative projects? Bang for the buck is new mantra

China seems to be dialling down on its investment commitmentsfor President Xi Jinping’s pet infrastructure project, the Belt and Road Initiative (BRI).

Addressing the Belt and Road Forum for International Cooperation in Beijing last week, Xihad said that China would allocate 350 billion yuan (US$106.6 billion) to the China Development Bank and a similar amount to the Export-Import Bank of China. The country will allocate an additional 80 billion yuan to theSilk Road Fund.

He stressed the funds would support the Belt and Road projects “on the basis of market and business operation”.

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This is being seen by experts as a pivot.

They note that this time, China has earmarked “modest” sums for the new financing of its BRI compared to the previous years.

‘Small but beautiful projects’

The reason given by the Beijing authorities for the decrease in funds is extracting more bang for the buck on smaller projects.

They have been pushing the narrative that “small but beautiful”or “small yet impactful” projects should be targeted in contrast to the large road and rail projects that was the hallmark of the early days of the belt and road projects.

The reason?

Larger infrastructure projects are becoming increasingly difficult to finance because of sovereign debt issues and growing risk.

So China is focusing on handing out smaller loans.

Examples include solar power plants to serve areas not covered by the existing power grid or roads to open remote areas to trade, reports Hong Kong-based South China Morning Post (SCMP).

“Gone are the days when it provides significant numbers of large loans for infrastructure projects,” David Shinn, a China expert and professor at George Washington University’s Elliott School of International Affairs, told SCMP.

“Rather there will be ‘small yet smart’ programmes and projects that emphasise ‘green and low carbon development’, lower cost people-to-people activities, and commitments of financial support for less risky projects,” Shinn added.

China’s financial constraints

Since the initiative was launched a decade ago, China has spent over US$1 trillion on Belt and Road investments, South China Morning Post reported citing figures presented by Chinese officials.

China’s National Administration of Financial Regulation, the country’s financial institutions have lent around US$687 billion for BRI projects.

But in the past one year, investments for the BRI have been witnessing a stark fall.

From US$558 million in 2021, China spent US$325 million in 2022. It is also increasingly financing projects with shorter repayment periods

At the summit, Xi said China would promote both signature projects and “small yet smart” programmes, with plans to carry out 1,000 small-scale livelihood assistance projects.

He added that China would continue to deepen cooperation on green projects in infrastructure, energy and transport.

(With inputs from agencies)



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