China's BRI faces slowdown following US trade measures
The tough trade measures introduced by the Trump administration could slow down Beijing's ambitions by restricting funds for BRI projects, ET has learnt. Xi, as result could face domestic challenges, that could slow down pace of implementation of BRI. The US counter-balancing to BRI also includes allocation of $113 million to investments in new technology, energy and infrastructure initiatives in the Indo-Pacific region, experts said.
Academics in mainland China admit that BRI is feeling heat of Western criticism of debt-book diplomacy. “China is facing enormous challenges with these reactions from the international community,” Pang Zhongying, a foreign affairs specialist at the Ocean University of China, told leading Hong Kong-based English daily South China Morning Post (SCMP). “Xi’s speech shows that [the leadership] has reflected on these developments and has made adjustments … and is trying to tone down its rhetoric,” Pang pointed out.
BRI projects are less open to local and international participation and therefore lacks transparency has been complain of number of countries including India. Opposition to BRI are growing in Western Europe and even Eastern European countries are looking to keep other sources of investments, officials speaking on the condition of anonymity told ET.
China is taking advantage of the fact that investment required in infrastructure sector globally in the next 40 years would exceed that of the past 4,000 years. A McKinsey report notes that “increasing infrastructure investment by one percentage point of GDP could generate an additional 3.4 million direct and indirect jobs in India, 1.5 million in the United States, 1.3 million in Brazil, and 700,000 in Indonesia” and could boost gross domestic product in countries with infrastructure gaps. Chinese state run funding institutes are stepping in as private capital globally is not readily keen to invest in infrastructure projects.
Out of all contractors participating in Chinese-funded BRI projects 89 per cent are Chinese companies, 7.6 per cent are local companies (companies headquartered in the same country the project was taking place in), and 3.4 per cent are foreign companies (non-Chinese companies from a country other than the one the project was taking place in), according to an article in SCMP published on Monday. “In comparison, out of the contractors participating in projects funded by the multilateral development banks, 29 per cent are Chinese, 40.8 per cent are local, and 30.2 per cent are foreign,” the article further noted.
Protests are also growing in certain BRI recipient countries in Asia. Malaysian Prime Minister Mahathir Mohamad said some BRI projects – $20-billion worth East Coast Rail Link and two pipelines worth over $2 billion – are being reconsidered due to costs involved in the project. Myanmar has decided to reduce exposure of Chinese loans for Kyauk Pyu port due to debt risks. While in Nepal China pulled out of hydropower project in Nepal, a rail link in Laos could be worth half of GDP of this small SE Asian nation. And in Pakistan members of China’s ruling party have reservations against CPEC.