Skip to main content

How will COVID-19 affect China's Belt and Road Initiative?

People wearing face masks visit Gubei Water Town on the first day of the five-day Labour Day holiday, following the coronavirus disease (COVID-19) outbreak, on the outskirts of Beijing, China, May 1, 2020. REUTERS/Carlos Garcia Rawlins
As the ripple effects of the coronavirus pandemic are felt across the globe, the nature, pace and scope of China's Belt and Road Initiative will also be affected.
Image: REUTERS/Carlos Garcia Rawlins
  • COVID-19 has affected the world in an unprecedented way.
  • This includes China's Belt and Road Initiative (BRI) that looks at globalising Chinese investment.
  • This article covers the biggest changes to BRI, including a change in supply chains, the digitizing of the BRI itself and the rise of private sector involvement.

COVID-19 has already significantly impacted the global economy, affecting manufacturing, supply chains and the movement of people and goods. As China mobilizes resources to manage the containment of the virus, it also has to balance challenges to Chinese liquidity and the general economic downturn.

As the ripple effects of the coronavirus are felt across the globe, the nature, pace and scope of Belt and Road Initiative (BRI) activity will also be affected, both in the near and longer-term future. Despite the challenges to manufacturing and supply chain activity, the pace of digital BRI activity has ramped up, as has investor interest in Chinese tech companies and the general healthcare industry.

In 2019, Baker McKenzie and Silk Road Associates (SRA) published five scenarios for BRI over the coming 10 years (2020-2030). The proprietary SRA model used to create the original forecasts aggregated 600 forecast outputs based on potential BRI investment across more than 100 countries and multiple sectors per country (power, railways, ports, roads and industrial parks).

However, the events of the past few months have witnessed even greater change than anticipated, and key aspects of this initiative have been altered in the wake of COVID-19 and ongoing commercial tensions between China and the US.

There are three key areas in which COVID-19 alters the flow of BRI activity relating to global supply and digital value chains, the rise of private sector involvement and increased opportunities for international collaboration.

The updated research shows that the quality of BRI activity should continue to improve in the longer-term, owing to greater participation of the private sector and foreign companies, as well as BRI’s tighter alignment with global supply chains.

Five divergent BRI forecasts for the decade ahead
Five divergent BRI forecasts for the decade ahead (click for larger version of image)
Image: Baker McKenzie

Fundamental change in global supply chains

Since 2018, Chinese companies have refocused their efforts on the larger markets of Southeast Asia, where supply chain linkages with China are strong and investment returns more predictable. COVID-19 will only supercharge the ongoing momentum of Chinese private manufacturers investing in Southeast Asia or cause them to consider their options.

As a growing number of Chinese manufacturers, alongside their mainly North Asian partners, seek to build capacity across Southeast Asia and hedge against the rising risks of supply chain disruption, Chinese infrastructure investments in Southeast Asia will benefit from these flows.

Additionally, Chinese state companies have already turned their focus to investments in ports, power and industrial parks across Southeast Asia, especially where these projects are aligned with Chinese investment in manufacturing and support the development of Chinese commercial ecosystems within the region.

Expedited digital BRI

There are opportunities aplenty for full digital value-chain for digital BRI activity, from ICT companies to e-commerce platforms, including firms that are well established throughout the BRI geography such as Huawei, Alibaba and Tencent.

It will be a natural fit for Chinese tech companies such as Alibaba’s DingTalk, Tencent’s WeChat Work and Huawei’s WeLink to bid for market share outside of China, especially in the BRI region. China’s MedTech sector may similarly find opportunities abroad. In the past few months, online doctor consultation platforms (Alibaba Health, Ping An Good Doctor) have seen consultations soar. Similar technologies may be able to be successfully implemented abroad if staffed by locals, given health sector shortfalls in many BRI countries.

Our co-author Ben Simpfendorfer, the founder and CEO of SRA notes that “China’s success in using AI and other technologies to identify and monitor virus carriers may also have application across the BRI, especially in those countries, such as India and Thailand, which are currently developing smart cities and where China’s technology companies are already heavily committed.”

Rise of private sector involvement

Chinese state banks will face greater capital constraints over the coming 12 months, and non-performing loans are likely to rise at home, owing to COVID-19 related financial weakness even as investments into the domestic health sector or other related infrastructure increase.

If Chinese state banks reduce funding, then Chinese private financial sectors will need to fight against weakening domestic conditions to play an even greater role. The private sector will likely focus on the most commercially profitable supply chain related investments, especially those related to industrial or mixed-use commercial projects that benefit from the relocation of production away from China to other low-cost destinations, as well as sales to the domestic market and BRI countries.

Great opportunities for international collaboration

The US-China trade war and COVID-19 only further incentivize China to adopt a more collaborative model towards BRI. BRI projects will increasingly focus on profitable supply chain related opportunities in Southeast Asia where the private sector and private capital play a greater role.

Even as COVID-19 spotlights the importance of supply chain diversification, the virus may similarly nudge BRI governments to consider the downfalls of their overdependence on a single country, especially should travel restrictions become a routine exercise each winter.


Whatever the lasting impact of COVID-19 on the global economy, BRI will remain a priority for China. What remains important will be the government’s short-term and long-term response to the virus, shortfalls in China’s health sector and the economic fallout for the country’s financially challenged small and medium enterprise (SME) sector. This will likely divert official attention and resources away from BRI over the next 12 months ̶ and potentially longer.

The reduced flow of Chinese capital and the economic fallout for the country’s financially challenged SME sector may bring about a less enthusiastic attitude towards the BRI over the next 12 to 24 months as China’s priorities shift to delivering results at home rather than abroad. This may mean reduced investments into BRI’s smaller, less critical markets where there are limited opportunities to connect such investments to the global supply. Central Asia, sub-Saharan Africa and Eastern Europe will accordingly see a short-term dip in BRI related activity, relative to Southeast Asia.

Despite this, the outlook is far from bleak. As China seeks to share its valuable experience of battling COVID-19 with other BRI countries, one key area of potential will be in projects focused on strengthening the health systems of low-income countries, even if focused on soft processes rather than hard infrastructure. This would be a potential area where China is likely to publicize its efforts as being a part of the BRI.

Beyond the short-term, changes to global supply chains will bring new opportunities for diversification through joint activity with others in both North and Southeast Asia. There is also potential for accelerated digital BRI activity in relation to Chinese tech companies and private players may now become more active in BRI



Popular posts from this blog

SSG Commando Muddassir Iqbal of Pakistan Army

“ Commando Muddassir Iqbal was part of the team who conducted Army Public School operation on 16 December 2014. In this video he reveals that he along with other commandos was ordered to kill the innocent children inside school, when asked why should they kill children after killing all the terrorist he was told that it would be a chance to defame Taliban and get nation on the side. He and all other commandos killed children and later Taliban was blamed. Muddassir Iqbal has deserted the military and now he is  with mujahedeen somewhere in AF PAK border area” For authenticity of  this tape journalists can easy reach to his home town to interview his family members or   ISPR as he reveals his army service number” Asalam o Alaikum: My name is Muddassir Iqbal. My father’s name is Naimat Ali. I belong to Sialkot divison (Punjab province), my village is Shamsher Poor and district, tehsil and post office  Narowal. Unfortunately I was working in Pakistan army. I feel embarrassed to tell yo

RWR Advisory: Belt and Road at a Glance

This edition covers developments from March 12 - March 26..  Belt and Road at a Glance   Subscribe to the Belt and Road Monitor Top Developments China National Machinery Industry Corporation, commonly known as Sinomach, has agreed to  build  a $845 million, 255-mile railway across  Iran , building upon a sustained period of growth for Chinese investment in Iran that accelerated after Xi Jinping’s state visit to the country in January 2016. The railway will link the cities of Tehran, Hamedan and Sanandaj. China Civil Engineering Construction, a subsidiary of CRCC, is currently also  building  a 263-km railway line from Kermanshah to Khosravi. According to Chinese entrepreneur Lin Zuoru, who  owns  factories in Iran, “Iran is at the center of everything.”On March 23, China’s Ministry of Commerce announced that foreign direct investment by Chinese companies in 50 Belt and Road countries fell by 30.9% year-on-year. While the Ministry stated that this number covers investment across al

CPEC Jobs in Pakistan, salary details

JOBS...نوکریاں چائنہ کمپنی میں Please help the deserving persons... Salary: Salary package in China–Pakistan Economic Corridor (CPEC) in these 300,000 jobs shall be on daily wages. The details of the daily wages are as follows; Welder: Rs. 1,700 daily Heavy Duty Driver: Rs. 1,700 daily Mason: Rs. 1,500 daily Helper: Rs. 850 daily Electrician: Rs. 1,700 daily Surveyor: Rs. 2,500 daily Security Guard: Rs. 1,600 daily Bulldozer operator: Rs. 2,200 daily Concrete mixer machine operator: Rs. 2,000 daily Roller operator: Rs. 2,000 daily Steel fixer: Rs. 2,200 daily Iron Shuttering fixer: Rs. 1,800 daily Account clerk: Rs. 2,200 daily Carpenter: Rs. 1,700 daily Light duty driver: Rs. 1,700 daily Labour: Rs. 900 daily Para Engine mechanic: Rs. 1,700 daily Pipe fitter: Rs. 1,700 daily Storekeeper: Rs. 1,700 daily Office boy: Rs. 1,200 daily Excavator operator: Rs. 2,200 daily Shovel operator: Rs. 2,200 daily Computer operator: Rs. 2,200 daily Security Supervisor: Rs.