China’s Belt and Road Initiative (BRI), sometimes referred to as the New Silk Road, was one of the most ambitious infrastructure projects Beijing has ever conceived. Launched in 2013 by President Xi Jinping, China aimed to expand from East Asia into Europe and greatly expand China’s economic and political influence.
However, Beijing’s attempt at world domination with its ambitious initiative appears to be drawing its last breath and would soon fail. Chinese President Xi Jinping has reportedly minimized mention of his pet project in his speeches, and we know exactly why.
BRI – Collateral damage from the Russian war
BRI is dead as a dodo. Yes, you read it right. For the CCP, it is no longer important. According to the diplomat, the Belt and Road Initiative, often dubbed the “Project of the Century,” is gradually disappearing from Chinese leaders’ pronouncements more than ten years after its inception.
Emerging markets appear to be struggling in the wake of the pandemic, rising interest rates and skyrocketing food and energy prices following Russia’s special operation in Ukraine. Now many of these nations are part of China’s BRI and are struggling to repay their debts. This brings new problems for Beijing, which is likely to encounter more troubled loans.
Continue reading: ‘Not my concern anymore’, a dejected Jinping buries his child ‘BRI’
According to the International Monetary Fund, these nations’ foreign exchange reserves fell by about 5% between December 2021 and June 2022, the largest half-year decline in about six years.
Beijing’s hesitation
Xi invested in emerging markets in many parts of the world. Much of this debt has been extended to nations with stable finances and those from which Beijing could derive strategic value in the future.
Understandably, China looked forward to controlling the invested nations’ local affairs as a result of their debt. However, cases of rebellion against the Chinese BRI in Africa and Latin America have been reported in the news in the past. Even if the Chinese do not exercise direct control, they would still have significant influence due to their significant investments.
However, the last pillar on which the Chinese have relied – the return on originated debt – has now gone bad in most of these countries.
According to estimates by the US think tank Rhodium Group, China is seeing an increase in renegotiations of interest waivers and other loan terms. It reportedly had 9 cases in 2019, but the number rose to 21 in 2020.
These renegotiations totaled $52 billion for 2020 and 2021, more than triple the $16 billion in the previous two years, as emerging markets were hard hit by the COVID-19 pandemic.
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In summary, Beijing has ultimately lost a lion’s share of its investments in foreign nations. China lost a significant chunk of that investment in Pakistan and Sri Lanka as the two nations plunged into a deep financial abyss in recent months.
As a result, China is curbing its expansionary lending initiative. According to the World Bank, Beijing’s new loans to lower-middle-income countries totaled just $13.9 billion in 2020, down 58% from a record high in 2018.
China would now reportedly invest its surplus to focus on domestic demand. His plan to become a superpower was foiled. You see, the Chinese real estate and banking sectors are struggling, the economy is approaching stagflation and falling confidence. It’s more than convenient for the Chinese to let go of a project they can’t really support.
