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China slimming down Belt and Road Initiative as new project value plunges in last 18 months, report shows

🔴The value of new projects across 61 countries fell 13 per cent to US$126 billion in 2018, with the figure falling further in 2019, according to Gavekal Dragonomics

🔴The project was launched in September 2013 by President Xi Jinping, but China’a access to available funds has since diminished

Topic | China economy

Cissy Zhou

Published: 8:15pm, 10 Oct, 2019

Updated: 8:46pm, 10 Oct, 2019

The growth of China’s Belt and Road Initiative slowed significantly over the last 18 months as Beijing’s overseas lending flattened out and the value of new overseas construction projects declined, new private-sector research showed, supporting existing theories about the decline of Xi Jinping’s signature plan.


The value of new projects spread across 61 countries involved in the plan fell 13 per cent to US$126 billion in 2018 compared to the previous year, with the figure falling a further 6.7 per cent in the period up to August 2019, according to a report by Gavekal Dragonomics. Existing contracts also dropped 4.2 per cent over the first eight months of 2019.


This is, in part, due to the level of funds available to invest in other countries having fallen sharply, with an International Monetary Fund report published in July showing that China’s current account surplus has dropped to close to zero for the first time since 2012.


In addition, Chinese state banks have become more cautious about lending to projects under the strategy, which is China's plan to grow global trade. Some member countries, including Myanmar, Sierra Leone and Tanzania, are also reluctant to borrow large sums of money due to debt fears, while some have reduced planned borrowings or even cancelled unaffordable projects, the Gavekal Dragonomics report said.

Host countries are becoming more careful about agreeing to Chinese-sponsored projects, as they seek to avoid becoming financially tethered to Beijing

Tom Miller

China committed to making only two Belt and Road Initiative-related loans over US$1 billion in the first half of 2019 – US$1.2 billion to Egypt and US$2.5 billion to Pakistan, according to the report. Overall, according to the China Global Investment Tracker from the American Enterprise Institute, China made 46 loans of over US$1 billion for overseas investment projects in 2016, with that figure dropping to 28 last year.

“On the one hand, tighter financing and more stringent project controls are forcing Chinese construction firms to be more circumspect,” said Tom Miller, a senior Asia analyst at Gavekal Dragonomics and author of the report. “On the other hand, host countries are becoming more careful about agreeing to Chinese-sponsored projects, as they seek to avoid becoming financially tethered to Beijing.”

President Xi launched the project to build infrastructure to connect China with East Asia, Africa and Europe in September 2013. The initiative has since been a vehicle for the world’s second largest economy to shift some of its excess manufacturing capacity in steel, cement and other building materials to developing economies. This has also helped to offset the slowing of its own domestic economy, with investment in and financing for the projects dominated by state-owned enterprises (SOEs).


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