Unpacking China’s Belt and Road Initiative

A photo of winding roads and cars. The image serves as an example of infrastructure developments connected to China's Belt and Road Initiative.

Launched in 2013, the Chinese Belt and Road Initiative (BRI) has invested over $930 billion in development projects around the world. These projects range from transport links and port developments to power generation and communications technology.  

The BRI brand became the vehicle for Chinese outbound investment and a main focus of China’s foreign policy. It promised much-needed investments for developing countries across Asia and Africa, as well as fast, efficient, high-capacity freight logistics. The BRI also aimed to link resources from workshops in China to consumer markets within the West. 

However, in many cases, China’s Belt and Road Initiative has failed to deliver on its promises. As a result, Chinese infrastructure projects are becoming more in line with present sensibilities and economic realities. 

Criticism of China’s Belt and Road Initiative 

Over the years, perceptions of the BRI have tarnished. This is due to several factors, including allegations of “debt-trap diplomacy.” This practice involves funding economically unviable projects with expensive loans and unfair repayment terms. 

However, examples such as the Hambantota Port project in Sri Lanka have been generally misrepresented in the media. The project portrays a predatory China seizing assets to use for its own ends when partner countries were unable to pay. This simplified explanation omits many factors, such as local corruption, economic wishful thinking and bilateral politics, and China’s strategic aims. 

In other words, while this narrative is not entirely false, as always, the truth is more complicated. 

BRI Projects and Investments 

The BRI brand covers over 13,000 projects in 165 countries. While many have been completed as planned and on budget, 35% have experienced major problems. Others have stalled or been cancelled entirely. For example, Malaysia cancelled $11.6 billion of railway and pipelines. Billions more have been scrapped from Kazakhstan to Bolivia. 

There are a variety of reasons behind these cancellations. These include everything from domestic issues like debt or security concerns to unforeseen geopolitical developments. Regardless, in some cases, they’ve severely impacted flagship BRI projects. 

The BRI’s goals for Pakistan 

Announced in 2015, the China-Pakistan Economic Corridor (CPEC) is often billed as the centerpiece of the entire BRI. With roots stretching back to the 1990s, the multi-project CPEC would transport links to the Arabian Sea. In turn, China’s troubled Western region of Xinjiang would experience economic growth, and therefore stability. 

The project would not just benefit Xinjiang and the Chinese interior. It would also open up a land route for central Asian countries and provide an alternative to the Strait of Malacca. Most importantly, it would cut 5,000 km out of the journey from Chengdu to Rotterdam. 

For Pakistan, the series of linked projects would bring much-needed power and transportation infrastructure. They would also offer economic opportunities, particularly to its own troubled region of Balochistan. Here, CPEC would culminate in the new megaport of Gwadar. If realized, the plans for Gwadar alone could significantly change logistics in Asia. 

As the lynchpin of the $62 billion CPEC project, the intention is to expand the port to be able to berth 150 ships and move 400 million tons of cargo per annum by 2045. Associated transport links stretching through Pakistan to Kunming, energy pipelines, and warehousing and housing developments have all been announced. 

However, by 2021, not one of these projects was complete.  

Challenges in Pakistan 

The Eastern Expressway road project, which links the port to the existing road network, was only completed in summer 2022 after more than four years of delays in construction. Despite the completion of several BRI power generation projects elsewhere in Pakistan, Gwadar still lacks electricity, water, and connectivity infrastructure. 

One of the reasons for the lackluster progress in Gwadar is the ongoing and entirely-predictable security concerns posed by the Baluch independence movements. Chinese workers have been targeted in repeated terror attacks by the Balochistan Liberation Army and the Baluch Liberation Front. They specify CPEC as a grievance in their propaganda and deliberately target its projects. 

While China has been quite tolerant of these risks, the further destabilization of Afghanistan following the US withdrawal in 2021 has cast further doubts on the security and viability of some CPEC projects. 

China’s Belt and Road Initiative in Kenya 

As an important gateway to a number of landlocked African states, Kenya is an obvious country for the BRI. Then-president Uhuru Kenyatta joined the project in 2017. Chinese investment has brought about the Mombasa-Nairobi standard gauge rail (SGR), Naivasha Inland Port, upgrades to Mombasa Port, and the ongoing container port in Lamu. However, even the seemingly successful SGR project, which halved travel times between Mombasa and the capital, came under criticism for its price, labour practices, and allegations of corruption. 

The project has also become an ongoing bone of contention with Kenya’s trucking industry. It made a $200m loss in its first years of operation. China has since pulled out of the planned second phase of the project over concerns about profitability. 

The debt incurred to China now accounts for over 80% of Kenya’s foreign loan repayments. In the last financial year, Kenyan repayments for infrastructure loans more than doubled to Sh73.48 billion ($608 million) after China refused a request to defer the payments. These terms are seen as unfair, and the Kenyan Port Authority (KPA) is seeking to renegotiate the terms of their loans. 

Newly-elected president William Ruto has implied an intention to revisit existing agreements in an effort to tackle this debt burden. This has created uncertainty over the viability of future planned projects if a renegotiation is unsuccessful. 

Eastern Europe’s BRI projects 

Between 2017 and 2021, the amount of cargo crossing to Europe from China exploded from 1,900 to 14,000 trips. The value of transported goods skyrocketed from $8 billion in 2016 to $75 billion in 2021. Much of this is thanks to the New Eurasian Landbridge (NELB) running from Lianyungang to Rotterdam via a mainline through Russia, Belarus, and Poland, with several other offshoot routes. By 2021, the NELB accounted for 4% of Europe-China trade and 1.46 million TEUs.  

Thanks to the NELB, rail times between Shanghai and Hamburg were cut by more than half. This created a niche for higher value goods, which could now be transported much faster than by sea and far cheaper than air. Further infrastructure development has been proposed, and as recently as February 2022, President Xi Jinping referenced Poland as the gateway to Europe. This recognition ties in with talks to expand Lodz as a logistics hub. 

Ukraine and the Belt and Road Initiative

Western sanctions following the invasion of Ukraine do not prohibit transportation of goods across Russia and Belarus’ territory, as long as they do not originate from and are not destined for those countries. Even so, cargo flows along the NELB have dropped 40% since the invasion of Ukraine. This is largely due to German manufacturers like Audi and carriers like DHL and Maersk refusing to use the route.  

The alternative Southern corridor through Central Asia is inhibited by ongoing sanctions on Iran. Furthermore, the Central Corridor through the Caspian Sea, Caucuses, and Black Sea lacks the capacity and the efficiency of the NELB. This negates the advantages rail transport from China had over maritime. 

Admittedly, Ukraine’s involvement in BRI projects is small, and its role in trans-Eurasian rail freight is negligible. This is mainly due to political instability and security issues since 2014, which stifled investment and led China to focus on Belarus instead. Even so, within two months of the invasion, Russia is estimated to have caused $80 billion of damage to Ukrainian rail infrastructure. Additionally, some routes such as the Changsha to Chop and Xi’an to Budapest lines have been closed or diverted.  

BRI projects in Ukraine have not fared well since the invasion. The port of Mariupol was dredged by a Chinese company only for the city to be largely destroyed. Xinjiang Beiken Energy invested in energy projects in Poltava, which has also been subject to Russian attacks.  

Even if the rail infrastructure of the NELB in Russia and Belarus remains intact and sanctions permissive to cargo, the likely ongoing geopolitical tensions with Russia makes further investment in trans-Asian rail by China doubtful, at least for the short to medium term. Possible reductions in trade brought on by the ongoing global financial situation and energy crisis could well reduce the demand that initially drove the project. 

What’s next for the BRI? 

Having occupied a place of pride in Chinese rhetoric for several years, China’s Belt and Road Initiative appears to be fading in significance. Recently, annual investment has dropped, and so has the involvement of President Xi. Even the language of the BRI has changed in Chinese parlance. The word “initiative” is often omitted in favor of the more friendly-sounding “cooperation.” 

Mention of the BRI itself has dropped out of use, vanishing from speeches of CCP officials and especially of Xi Jinping himself. When the BRI is talked about, “High quality belt and road cooperation” is emphasized, alluding to a more rationalized and risk-averse approach. 

In the months to come, another initiative could replace the BRI, such as the Global Development Initiative (GDI). The European Union’s Global Gateway and G-7’s Build Back Better World initiative are also contenders. Regardless, in order for these infrastructure and investment goals to achieve long-term success, something needs to change. And with that change will come a need for quick and decisive supply chain re-strategizing. 

As initiatives like China’s Belt and Road Initiative continue to impact supply chains, staying informed is key. Learn how Overhaul’s Intelligence as a Service keeps you up to date on the latest in global supply chain news. 

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