Due to China’s dwindling economy, President Xi Jinping’s dream of setting a new world order seems to have come to a halt after the Covid-19 slowed down the Belt Road Initiative (BRI), pushing it towards becoming financial inviable.
According to media reports, Beijing has been forced to cut back on new loans and investments under the BRI due to covid-19 induced economic troubles.
According to the Green Belt and Road Initiative Centre, a research organization, Chinese investment has reduced to USD 47 billion in 2020–a whopping slump of 54 per cent in just one year.
Wang Xiaolong, director-general of the Chinese Foreign Ministry’s International Economic Affairs Department, said 20 per cent of the BRI projects were seriously affected while other 30-40 per cent witnessed adverse impact.
China’s economy has slumped drastically during the pandemic. There are reports that the lending under the BRI has come down from USD 75 billion in 2016 to just USD 3 billion in 2020.
Even in China’s ally Pakistan, just 32 of the total 122 projects announced under the BRI could be completed so far.
The reduced growth rate has forced the Beijing government to tighten fiscal discipline and work on financial risk, which would translate into lower prospects of China pumping money into the BRI projects now.
According to an independent research organization, Rhodium Group, the progress or growth of BRI projects had begun decelerating even before the COVID-19 outbreak. It asserted that Chinese investment became stagnant and even decelerated in most of the developing world in the past three years.
China had been wooing developing or poor African and Asian countries since the inception of BRI projects. The Covid-19 outbreak however has caused millions of Chinese businesses to go bankrupt and cash flow to be disrupted, thus making a huge impact on the country’s economy.
Now the contraction in Chinese lending is going to widen the overseas lending gap as well. As the BRI stumbles, China’s diplomatic image as a dependable development partner would be dented.
James Crabtree, associate professor at Lee Kuan Yew School of Public Policy in Singapore said China has to walk on the tight rope since BRI loanee countries want their loans to be cancelled while Chinese people are against overseas spending in such difficult times.
Bradley Parks, executive director of research lab AidData cited difficulties in construction activities, which would lead to “a significant slowdown” in the implementation of the BRI.
“With the sustainability of financing for the 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 for some BRI projects,” said global law firm Norton Rose Fulbright.