As China’s Belt and Road Initiative (BRI) is running out of steam, the communist regime now no longer boasts about the program that its leader Xi Jinping used to brag as “the project of the century.”
According to an analysis from Forbes, the BRI seems to fall far short of its original goals, which were designed to alter the global balance of power and influence.
Now, Xi Jinping has to choose a more humble language, mentioning the initiative via such messages as reform and retrenchment.
Forbes said that the Belt and Road Initiative has been showing major financial weaknesses.
To implement the BRI, China has approached poorer countries in Asia, Africa, Latin America, the Middle East, and the periphery of Europe. It provides loans to their key infrastructure projects such as ports, rail links, dams and roads.
China’s state-owned banks have arranged the loans and Chinese contractors have conducted and managed the projects. By that way, Beijing gained influence and great leverage over the countries joining the BRI.
Since Xi Jinping took office, China has offered loans worth more than $1 trillion in some 150 countries, making it the world’s largest creditor.
However, the West has claimed that China has been engaging in “debt trap” diplomacy under the BRI, using its loans for geopolitical interests.
One example exposed is the case of Sri Lanka. The country built a port project using the BRI loans. However, the project failed to generate enough traffic to service the debt, even before the Covid pandemic shut down trade. Those loans have gone bad.
Another case is Pakistan, one of the largest BRI participants. Pakistan fell behind on payments for electricity from a new China-backed power project, which led to a power crunch.
The World Bank economists estimate that some 60% of all BRI loans have involved countries in financial distress.
China has long refused to acknowledge the financial trouble.
The Chinese authorities have put bankers under pressure to avoid any reference to bad debts or failed loans. Instead, the Chinese banks were encouraged to keep the borrowers afloat by extending their loan maturity.
The communist regime has also refused to work with the Western efforts through the Paris Club to renegotiate troubled loans.
Forbes wrote: “No doubt China’s leadership wanted to avoid the embarrassing admission that their loans had problems, but refusing cooperation would also have put repayment to China ahead of others should failure become unavoidable.”
Now China is under significant pressure when its state-owned banks are facing massive defaults from domestic property developers and on their BRI loans.
In the past, when the economy was still strong, China was able to cover for the defaults with its own resources. But it is no longer the case now when the economic growth is slowing sharply.
According to Forbes, the Chinese government has now become much more open on talking about debt restructuring. It has already negotiated with Chad, Ethiopia, and Zambia.
It means that the BRI has certainly lost much of its force, and China suffered a major setback in prestige and certainly financially.
Xi has described “the project of the century” as “increasingly complex” and in need of stronger risk controls and cooperation.