Has China's Belt and Road Initiative been a success?

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In today's edition of Publisher's Parmesan, we delve into the intriguing discussion of whether the BRI deserves the mantle of success or what lies ahead for this global endeavour.

For context, the Belt and Road Initiative (BRI), known in China as One Belt One Road (OBOR/1B1R), unfurled its sails in 2013 as a monumental strategy by the Chinese government. Its aim? To invest in over 150 countries and international organizations, sculpting a landscape of global infrastructure development.

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What Google and Facebook Owe News Publishers - by Haaris Mateen

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Many countries are now making Google and Facebook pay publishers for using their content, just like Australia. In response, digital platforms have started paying news producers directly to avoid these bills. However, the above-mentioned study reveals that these deals do not fully compensate for the value generated by news content.

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Ankit is currently a Global Product Manager at HSBC with a focus on lending and allied products. Previously, he has worked with American Express, BNY Mellon and ICICI Bank.

Has China's Belt and Road Initiative been a success?

The initiative is one of the biggest development programmes in history. Ten years on, the government is bailing out hundreds of billions of dollars worth of loans to protect its development banks from default. So should the BRI be regarded as a success and what comes next?

The Belt and Road Initiative (BRI) marks its 10th anniversary amidst a legacy of colossal financial investment and geopolitical influence. This monumental endeavour by China, often touted as the largest development program by a single country in modern history, has captured global attention.

A Decade Unveiled: BRI's Genesis and Intentions

The BRI's inception a decade ago signalled China's expansive vision—a global public goods offer to bolster infrastructure, financing, and connectivity. Beyond its altruistic facade, the initiative also served as a strategic avenue to tackle China's domestic economic woes following the aftermath of the global financial crisis.

Experts suggest that the BRI, at its genesis, held dual purposes: a gesture towards global development and a solution for China's own economic challenges.

Navigating Domestic and International Interests

Post the financial crisis, China embarked on an economic stimulus, channelling colossal funds into domestic infrastructure projects and heavy industries. However, by 2011, signs of an overheated economy and excessive capacity emerged. It was during this juncture that the Chinese government directed its focus outward, urging companies to seek lucrative opportunities in international markets.

This pivot not only facilitated the global outreach of Chinese enterprises but also propelled the injection of capital into China's policy banks and financial institutions, facilitating the financing required to secure overseas contracts.

The Impact and Controversies of BRI

The staggering $1 trillion lent by Chinese financial institutions over the last decade has birthed mammoth infrastructure projects across continents, from standard gauge railways in Africa to high-speed railways in Southeast Asia. These endeavours, often termed mega projects, have not only reshaped the physical landscapes but have also attracted wider investments, including the establishment of industrial zones, aiming to drive greater foreign direct investments.

Researchers emphasize the tangible impact witnessed on the ground—local employment generation, increased incomes in certain regions, and a transformative effect on the urban sprawl across various nations, especially in Africa and Ethiopia.

However, amidst the triumphs lie the shadows of controversy. The inherent nature of infrastructure projects, characterized by high-risk and long-term investments, has raised concerns. While these projects serve a broader public goods function, certain Chinese-led ventures have struggled post-construction, failing to justify their economic rationale.

Reports have emerged of the Chinese government stepping in to bail out countries that faced challenges in repaying BRI-related debts, sparking debates over the sustainability and feasibility of the initiative.

The Dilemma of Bailouts and China's Role

Reports suggest China providing substantial financial support, amounting to $104 billion, to rescue countries entangled in BRI-related borrowing predicaments. However, separate reports underscore a nuanced perspective: it's not solely about bailing out recipient countries but rather safeguarding Chinese financial institutions. The loans extended to borrowing countries ultimately circle back to paying off Chinese banks and contractors, revealing a complex web of interdependencies within the BRI ecosystem.

This systemic issue exposes the entwined interests of borrowing nations, Chinese companies eyeing lucrative contracts, and Chinese policy banks. The exuberance in the early 2010s led to a proliferation of ambitious projects, followed by a cautious reassessment post a significant loss in China's dollar reserves in 2015.

Future Trajectories and the Shifting Landscape

As the BRI narrative evolves, signs of recalibration surface. Despite a decline in lending and a heightened risk-averse approach, China maintains a top-level commitment to the BRI, albeit with altered rhetoric. There's a growing emphasis on smaller, greener projects aligning with sustainability goals.

Simultaneously, concerns arise over the fate of crucial infrastructure financing for the developing world. The shift in China's BRI strategy sparks questions about where the necessary funds will originate as the world grapples with impending challenges such as climate change and population explosions, especially in regions like Africa.

Competing Offers and China's Role in Climate Investment

The emergence of competitive offers from the G7 and the EU's Global Gateway signifies attempts to counterbalance the BRI. However, China's unparalleled prowess in renewable technologies positions it uniquely in supporting developing countries' green transitions. Its dominance in manufacturing solar panels, wind turbines, and clean energy technologies offers a promising avenue for aiding green energy transitions in developing nations.

The BRI's trajectory at the 10-year mark reflects the intricacies of global development and finance. As China recalibrates its strategy and global dynamics shift, the narrative of the BRI evolves—a story of lessons learned, challenges acknowledged, and opportunities yet to unfold. The developing world faces uncertainties yet holds glimpses of hope with the potential for continued Chinese support in advancing sustainable development pathways.

In essence, the BRI's legacy is not just a tale of past accomplishments but a harbinger of shifting paradigms, where sustainability, climate consciousness, and a revamped approach to global infrastructure strategies are at the forefront. As the world grapples with the future of development finance, the BRI's evolution signifies a narrative still in the making—a chapter that promises to shape the trajectory of global development for years to come. 

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