China wants to win the world over with the BRI, but something's amiss

A total of 138 countries had officially signed up for China's Belt and Road Initiative (BRI) by December 2020. When combined, they accounted for 63% of the world's population and 40% of the global gross domestic product (GDP) in 2020. The official endorsement of the BRI by 138 countries lends credibility to this initiative. BRI is now a truly global endeavour.

Chinese firms have invested heavily in the construction of infrastructure projects overseas, ranging from roads, seaports, power plants and industrial parks to railway construction. State-owned enterprises (SOEs) have been involved in most of China's global investment abroad under the BRI framework over the years.

State-owned financial institutions in China are providing loans abroad for BRI-related projects. Two state-owned Chinese banks provided up to US$462 billion in financing overseas infrastructure development projects from 2008 to 2019. This is almost equivalent to the amount of development financing provided by the World Bank during the same period.

According to data from China's Ministry of Commerce, compared to the corresponding figures in 2018 and 2019, Chinese direct investment in the BRI countries modestly increased to US$18.1 billion in 2020. This indicates that China is still pumping money into BRI-related projects abroad amidst the pandemic. The completion of the China-Laos railway shows that the BRI remains on track despite the Covid-19 pandemic.

The BRI was initially centred on infrastructure financing and construction, but its scope has expanded to include areas such as health. Leveraging Chinese-made vaccines, China has been actively promoting the "Health Silk Road" across the region and worldwide since late 2020. China's effective containment of the pandemic has provided an opportunity for it to promote the Health Silk Road abroad.

According to Bridge Consulting, a consulting firm based in Beijing, China-made vaccines have so far been provided to 117 countries for emergency medical use. Chinese vaccine manufacturers have already sold up to 1.75 billion doses of vaccines under bilateral commercial contracts to supply vaccines.

Nevertheless, in terms of vaccine donation (in contrast to commercial sales) abroad, according to Lowy Institute's vaccine donation data, China is the second largest Covid-19 vaccine donor after the US. The US had donated 91.9 million doses of vaccines abroad, whilst China's vaccine donation was 38.9 million doses by 2021.

Despite China's claims that the BRI is an economic cooperation initiative that will foster economic growth and industrial development for the recipient countries, create trade and investment opportunities and promote stability and peace in the world, the perception of China in general, and the BRI in particular within the region and throughout the world, is becoming more negative. For example, as affirmed by the Pew Research Centre's Spring 2021 Global Attitudes Survey, developed nations are becoming more negative about China.

Major problems arising from China's push for BRI implementation include first, weaknesses in terms of compliance with internationally recognised standards, such as lack of transparency and open bidding, and labour and environmental protection safeguards. Second, many BRI projects have failed to attract private capital or win over the necessary support from the local stakeholders. Third, BRI projects abroad lack participation by local companies and workers from recipient countries.

In response to international scepticism and criticisms of the BRI implementation, during the second BRI summit held in 2019, China's President Xi Jinping pledged to deliver a multilateral BRI that would generate benefits for all participating countries and not China alone. The Chinese government and Chinese firms have subsequently taken steps to translate Xi's pledge into concrete measures in pushing for the BRI implementation.

China has shown its readiness to adjust project refinancing measures for the low-income and developing countries. An example is Malaysia's East Coast Rail Link (ECRL). In the face of heavy criticism on the lack of transparency of the project and heavy construction costs from the then Mahathir administration, China and Malaysia concluded contract renegotiations for the ECRL in 2019. China offered concessions to Malaysia and agreed to lower ECRL construction costs by roughly 30%. Construction resumed after the renegotiations.

To promote the multilateral BRI, China is adopting "third-party market cooperation" as a flexible approach in its pursuit of cooperation with other countries under the BRI umbrella. China has already signed related agreements with 14 countries, including France, Italy, Japan, Switzerland and Singapore, to advance third-party market cooperation on infrastructure financing and construction.

Another area of focus is forging a clean and green BRI. Large-scale infrastructure development under the BRI umbrella comes with significant environmental impacts as China's investment in overseas energy projects has long been tied to carbon-intensive fossil fuel like coal power. However, coal power generation is admittedly the world's single biggest cause of carbon emissions. Many BRI energy and transport projects have been built without conducting proper environmental impact assessment studies. This could generate long-lasting negative environmental consequences for recipient countries along the Belt and Road.

Against this backdrop and in response to pressure from global climate change advocates and local protests in recipient countries, Xi Jinping pledged to deliver a clean and green BRI in his speech delivered at the second BRI summit in 2019. The Chinese authorities have since incorporated environmentally sustainable objectives into BRI implementation plans.

China has also taken the lead in the field of renewable energy production in terms of installed capacity of hydro, solar and wind power. It is the largest exporting nation of solar panels and wind turbines. Leveraging its strength as a global renewable energy superpower, China is promoting the green BRI concept by gradually shifting the focus of its overseas energy investments to more renewable power projects among the BRI countries. In 2020, the percentage of renewables in China's total overseas energy investments rose to 57% (or US$11 billion).

However, there are certain limitations to China's push for a clean and green BRI. Some of the data on BRI investments convey a contradictory message from the Chinese side. For example, although China has made more investments in renewables, the share of carbon-intensive coal investment in its total energy sector investment went up to 27% in 2020 from 15% in 2018. This signals that China has yet to make a decisive move towards investing primarily in environment-friendly BRI projects. Chinese firms and banks so far have not stopped financing and building carbon-intensive coal-fired energy projects in BRI countries, despite international calls to stop funding coal-fired power plants.

It is too early to tell how far China is ready to go with this readjustment process in the long run. Although BRI implementation will slow down amidst the global coronavirus pandemic and the shift in the global geostrategic landscape, it is unlikely to stop China's determination to push for the BRI.

The BRI is important for the Chinese domestic economy, the Chinese firms and Chinese-made goods in gaining global market access, and China's pursuit of its geostrategic ambitions.

An initial version of this article was first published as an East Asian Institute Background Brief.

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