By Kevin P. Gallagher
China’s Belt Road Initiative (BRI) – the ambitious and loosely defined program of overseas investment, economic integration, and South-South Cooperation – turns ten this month. A plethora of stories have abounded since the onset of the BRI that have not let the facts get in the way of a good story. At the Boston University Global Development Policy Center (GDP Center), we have been generating a theoretically driven and empirical-based understanding of the BRI since our inception six years ago and our new report sums up our modest contribution to the understanding of this bold global initiative.
According to our work, in its first decade, the BRI has brought significant benefits to countries that have engaged with China while also triggering real risks for China and partner countries alike. Moving forward into one of the most crucial decades in the world economy, both China and its partners should work to maximize those benefits and minimize the attendant risks.
Although it has become common practice to do so, the benefits of the BRI are undeniable. First and foremost, the BRI has brought a large amount of additional financing to emerging markets and developing countries during the period. According to our China’s Overseas Development Finance Database (which tracks flows from China’s two development finance institutions (DFIs), the Export-Import Bank of China and the China Development Bank).
From 2008-2021, Chinese Development Finance Institutions alone provided financing at approximately the same order of magnitude as the World Bank, at half a trillion dollars, and at least $331 billion during the BRI period of 2013-2021.
The benefits of the BRI have helped developing countries, China, and the global economy at large, but the risks have taken a bite out of those benefits.
Although many of the narratives about the risks of the BRI – that its goal is ‘debt trap diplomacy’, to support authoritarian regimes or to export Chinese workers across the globe – have turned out to not be true, it is also undeniable that the BRI is also associated with significant risks for partner countries and China alike.
What is more, Chinese finance has provided much-needed infrastructure and energy finance that has been associated with robust economic growth and an expansion of energy access across the world. More recently, China has provided much-needed liquidity and fiscal support to nations in distress due to the multiple shocks that have wracked the world economy since 2020. New finance and growth opportunities have granted more agency to developing countries, allowing the most strategic to bargain for their best interests.
The BRI has also accentuated climate risk, risks to global biodiversity, and the debt crisis facing an increasing number of developing countries across the world. The work that we summarize in our new report finds that China’s overseas fleet of fossil-fuel power plants emit upwards of 245 million tons of carbon dioxide annually given the numerous coal plants that China has financed and built through the BRI. Chinese finance is also associated with an erosion of natural capital and poses greater risks to Indigenous lands than comparable World Bank projects.
While Chinese finance is not a function of ‘debt trap diplomacy’ nor the cause of the current debt crisis in developing countries, China’s loans are a significant portion of the debt stock and debt payments of the most distressed countries in the Global South. In terms of the external debt stock owed by the most debt-distressed countries, China holds 10% of that debt stock (behind private bondholders at 28% and multilateral development banks (MDBs) at 28%). In terms of external debt payments, 21% is owed to China over the next few years, with 32% to bondholders and 26% to MDBs.
The benefits of the BRI have helped developing countries, China, and the global economy at large, but the risks have taken a bite out of those benefits. China has already taken a step forward in attempts to maximize the benefits with the ‘small is beautiful’ approach, the end of new overseas coal financing, a new focus on low-carbon growth, and a willingness to suspend debt payments for some of the most distressed developing countries. These are steps in the right direction that need more ambition from Beijing, but the BRI has always been a two-way street. Developing countries need to take advantage of their growing agency to capitalize on Chinese finance opportunities and steer them toward resilient, socially inclusive, and low-carbon growth strategies.
We at the GDP Center applaud China for a strong first decade and look forward to tracking the second.
Kevin P. Gallagher is the Director of the Boston University Global Development Policy Center and a Professor of Global Development Policy at the Boston University Frederick S. Pardee School of Global Studies. Follow him on X: @KevinPGallagher.
