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China may reboot its BRI projects – focus more on domestic revival

A CPEC project

Amid China’s slowing economy, its much-hyped Belt and Road Initiative is set to be further impacted. China, which is grappling with multiple domestic problems leading to an economic slowdown, is now set to focus on setting things in order at home. 

The BRI projects have yielded little returns for Beijing until now with the surge in debt levels across countries pushed by the Covid 19 pandemic and the ongoing Russia-Ukraine war have made things worse.

China posted an economic growth of 4.8 per cent in the January to March period of this year but macro-economic indicators in the second quarter clearly reflect a grim picture for the world’s second largest economy.

“The BRI has actually pushed up debt levels for local governments within China that is grappling with multiple domestic problems driven by the acute slowdown in its real estate sector and now with the zero Covid approach..the authorities are aware of the situation and in this context, the BRI will lost focus,” an analyst engaged with a research agency told India Narrative on condition of anonymity.

Consider this. Pakistan, which has been the backbone of the project with the over $65 billion China Pakistan Economic Corridor Pakistan (CPEC), is inching towards bankruptcy.

A large number of projects under the BRI are now being abandoned.

The South China Morning Post in its report said that major indicators measuring the state of the world’s second largest economy fell short of expectations in data released on Monday, with industrial production, retail sales, fixed-asset investment and  the surveyed jobless rate falling to their weakest levels in more than two years.

That apart, China’s exports growth for April too slowed down to 3.7 per cent compared to a year earlier to $273.6 billion, down from 14.7 per cent recorded in March. This is the lowest since June 2020.

“With this worrying trend, Beijing’s thrust will be on domestic economic revival and BRI projects do not feature in this plan as they are only bleeding Chinese local governments and state owned enterprises,” the analyst quoted above said.

Launched in 2013, the BRI is considered Chinese President Xi Jinping’s pet project. It was aimed at building a broad community of shared economic and interests across continents including Africa, Latin America, Europe besides Asia.

A report by Voice of America said that credit risks have risen along with BRI project cancellations. “Chinese debt now exceeds 10 percent of gross domestic product (GDP) in many low- and middle-income countries,” it said.

The cost of the project has escalated significantly over the last few years. Since Beijing has never published any official data on its lending and investments, analysts said that a fair risk assessment on account of delay in project implementation cannot be undertaken due to lack of transparency. The opacity in the lending pattern has also made it difficult for rating agencies and other think tanks to analyse the possible impact it will have either on China or the other beneficiary countries.

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