The coronavirus pandemic has taken quite a shine off China’s biggest geopolitical and geo-economic project, Belt and Road Initiative (BRI). Its ensuing economic global crisis pushes China to change and calibrate its BRI strategy. Many projects have been put on hold. Perhaps substantial numbers of projects may never see the end of the day and the final BRI may well be a dwindled version of the original plan and vision.

The pandemic has played a part which has halted or delayed BRI specific projects like the China-Pakistan Economic Corridor (CPEC), Cambodia’s Sihanoukville Special Economic Zone, the Payra Power Plant in southern Bangladesh, and the Port City development project in western Sri Lanka to name a few.

BRI plan involves linking more than 120 countries across Asia, Europe and Africa via a series of rail, road and sea infrastructure projects, thus drawing a new Silk Road. Beijing wanted to foster regional connections and economic integration, thereby intensifying its economic and political influence.

The Chinese economy has contracted by 6.8 per cent in the Q1 of 2020. Beijing is looking to prioritise mitigating the financial impact of the virus and resolving the ongoing trade war with the US, Australia and Canada over rolling out new overseas infrastructure projects as part of the BRI.

China’s rethinking and calibration have hugely impacted its ongoing flagship project China Pakistan Economic Corridor (CPEC) according to the German Marshall Fund (GMF) new study. "The troubles faced by the China Pakistan Economic Corridor (CPEC), the flagship of China’s Belt and Road Initiative (BRI), are perhaps the most conclusive demonstration that the BRI model that has been in place for the last few years is no longer sustainable. Even before the coronavirus pandemic, CPEC had stalled. Not only are the figures commonly cited for the total package of projects under this framework since its launch in 2015 which run as high as $62 billion no longer accurate, investments of that magnitude are not under consideration either," says Andrew Small, author of the study.

In the coming years, the CPEC agenda will therefore largely be focused on completing investments that have already been agreed (including around Gwadar port), moving ahead with considerably slimmed-down plans for special economic zones, and identifying small additions that fit the current Pakistani government’s agenda, such as socioeconomic projects. This is a change in scale from the aspirations that once characterized the scheme, which one Chinese official characterized as moving from "mega projects" to "peanut projects," the study says.

"Scored against the original objectives set by the Chinese and Pakistani governments, CPEC is a disappointment. It hasn’t been a "game-changer", and it has been years since anyone on the Chinese side seriously talked about it in such transformative terms," said Small and added that doesn’t necessarily make it a failure. There is still a significant volume of projects in motion, and it is clearly an upgrade to the Sino-Pakistani economic relationship pre-CPEC, which was extremely weak.

The smaller scale also means the debt situation is more manageable. The energy projects have moved ahead at a good pace; other infrastructure projects at a more modest one; Gwadar slowly; special economic zones glacially. But even the energy projects have not been great for the Chinese firms involved given (predictable) payment shortfalls.

Several factors contributed to the downgrading of ambitions for CPEC by Pakistan and China. It has been hit on three fronts – economic, political and strategic. Economic considerations are primary. Pakistan’s fiscal and balance-of-payments situation means that the full-scale version of CPEC is not financially viable. CPEC made its biggest moves between 2015 and 2018, then stalled after Imran Khan’s government came in.

Political factors have also contributed to CPEC’s fading fortunes. As has been the case in other BRI countries, when CPEC was initiated it was perceived to be closely tied to the agenda of the government of the day led by Prime Minister Nawaz Sharif of the Pakistani Muslim League rather than being rooted in a broader national consensus. Opposition parties, swathes of the business community, and critically the army had reservations about how CPEC was being conducted, even if they supported the general concept.

For its part, China has been sceptical about the Pakistan Tehreek-e-Insaf government led by Prime Minister Imran Khan that took office in 2018, compared to the warm relationship it enjoyed with Sharif. But this year, it has made a modest recovery, with China and Pakistan signing two hydropower projects and one to upgrade the Karachi-Peshawar highway. Pakistan is facing delays in setting up SEZs as pandemic makes movements of workers and materials much more difficult.

The downscaling of CPEC’s ambition is likely to be replicated in other BRI countries. From Myanmar to the Maldives, China has repeatedly experienced situations in which its overbearing economic presence and poor handling of local politics undermined its economic and strategic goals. This will be considerably exacerbated by the pandemic. Beijing faces a wave of renegotiations, many of which will require a revisiting of the original contract terms rather than simply a rollover of debts. Clearly, Xi Jinping’s signature foreign policy initiative is in rough weather..