China's Belt And Road Initiative Collides With Pandemic Realities

One of China's signature economic and foreign policy initiatives in the last few years has been the Belt and Road Initiative. The idea was that China would lend money to national or local governments in other countries transportation or infrastructure projects, especially in Africa and Asia but also in Australia and Latin America. Chinese firms would often be hired to do much of the design and construction work, and China might maintain some ownership share of the project. The borrowing jurisdictions would then receive both immediate economic benefits from the construction effort itself and then longer-run benefits from being connected to an improved transportation infrastructure. 

In theory, this plan could benefit all parties. In practice, there have been reasons for concern. I laid out some of the issues in "China's Belt and Road Initiative: Grand or Grandiose?" (September 10, 2018), "China's Belt and Road Initiative: The Perils of Being a Subprime Global Lender" (July 30, 2019), and "China's Belt and Road Initiative: Could It All Come Crashing Down?" (November 18, 2019). The basic concern was that a sizeable share of China's lending was for high-cost, low-benefit projects that had been turned down by other international lenders. While Chinese construction companies and elites in borrowing countries were benefiting in the short-term, a rising number of questions and concerns were being expressed in borrowing nations about the growing debt burden, environmental costs, and treatment of local workers. In addition, borrowing countries have noticed that China's infrastructure investment often seems to include a Chinese military or security component. 

And then the global pandemic recession hit in 2020. China had less to lend, and borrowers were finding it harder to repay. Many projects of the Belt and Road Initiative faced an acid test. The Financial Times recently published this chart, showing overseas lending by the China Development Bank and the Export-Import Bank of China (two major official overseas lenders) compared with the World Bank. The data is based on estimates from the Global Development Policy Center at Boston University.

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