SASKATOON — China’s Belt & Road Initiative is falling short of expectations, according to a new report.
The country embarked on the initiative in 2013, vowing to revitalize the ancient Silk Road and enhance trade with Europe, Asia and Africa.
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At the time, Canadian grain analysts flagged the BRI as a big threat because it had the potential to create new trade routes for one of Canada’s top customers.
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But the competitive threat is turning out to be smaller than once feared.
“There is an enormous gap between what Beijing promises and what it has delivered,” according to a new report by the Lowy Institute, an Australian international policy think-tank.
The gap between what China has committed to in Southeast Asia and what it has delivered amounts to more than US$50 billion.
However, China’s investments are still a prominent feature of the development landscape in that region of the world, with $29.63 billion already spent.
“China is involved in 24 out of the region’s 34 infrastructure megaprojects (those costing $1 billion or more) and is easily the largest infrastructure financing partner,” stated the report.
The list includes 14 energy projects, seven railways, an airport, a bridge and a port.
But many other signed projects have been cancelled, downsized or seem unlikely to proceed, and new project deals are on the decline.
Marlene Boersch, managing partner with Mercantile Consulting Venture, said the investments that have been made are already having an impact on Canadian agriculture.
“We seem to be losing market share in a lot of destinations, and some of that I would say is related to what the Belt & Road has achieved so far,” she said.
“It now allows them to go different routes.”
That has introduced new competition in China for crops like peas and flax, with imports from the Black Sea displacing Canadian product.
“Overall, it seems pretty apparent to me that it’s creating difficulties for North America,” said Boersch.
“There’s no question there.”
She believes the rail networks that have already been built are helping connect China to Black Sea exporters.
Changes in the geopolitical landscape are also promoting increased trade with the growing “rapprochement” between China and Russia.
The shift in trade could have been even more pronounced had China fulfilled all its BRI commitments.
The Lowy Institute report suggests that the COVID-19 pandemic is partially to blame for the lack of progress.
China’s Ministry of Foreign Affairs said in 2020 that 20 percent of BRI projects were “seriously affected” by the pandemic.
However, the institute thinks other factors were far more instrumental in the low implementation rate.
“These factors include the nature and scale of the projects, political instability, local stakeholder engagement and the global energy transition,” said the report.
China’s projects are mainly infrastructure projects, which are notoriously susceptible to delays.
“China’s bias towards megaprojects amplifies the risk,” stated the report.
“Some estimates suggest that, on average, nine out of 10 megaprojects exceed their allocated timeline and budget.”
Frequent changes in governments and policy directions in the Southeast Asian nations China is partnering with have led to fragmented decision-making and divergent views and priorities.
The Asian giant has also done a poor job of engaging local partners.
“China has often been criticized for its top-down approach, limited transparency and inadequate consultation processes,” said the Lowy Institute.
As well, many BRI projects have been hurt by the rising imperative to accelerate the transition to clean energy, such as plans to build coal-fired power plants in Vietnam.
The institute says there is much uncertainty about the future of BRI.
“Debt crises in many borrowing countries and deteriorating economic conditions in China itself have fueled predictions that the BRI will languish,” stated the report.
However, China appears to be learning from its mistakes, shifting away from megaprojects and toward smaller ones and addressing some of the other concerns raised in the report.
“There is clear intent at the highest levels of the Chinese Communist Party to maintain a BRI that is long-lasting and responsive to changing circumstances and the demands of its partner countries,” stated the report.
“New funding injections and commitments to policy reforms are indications that the BRI is here to stay.”
