Xi Jinping boasted of many achievements during his two-hour address opening the Chinese Communist Party congress Oct. 16. The Belt and Road Initiative wasn't one of them.
China's leader may want to forget that he himself opened this onslaught of foreign investment in two 2013 speeches. That won't be easy, with more than $800 billion committed to projects in 147 countries.
Not every BRI loan has gone belly-up, leaving some hapless developing nation in a debt trap. But neither is Beijing anywhere near its implicit goal of expanding its soft power to rival the democratic West's.
"I'd give the BRI a B- or C+," says Jeremy Garlick, a China studies professor at the Prague University of Economics and Business, who has written a book on the initiative.
BRI seemed like a great idea at the time. China was sitting on huge surpluses of currency, which were earning no return at post-2008 interest rates, and excess industrial capacity. It could leverage these to secure raw materials and look like a global benefactor.
While press coverage has focused on BRI debacles in Sri Lanka and Pakistan, the three top borrowers are oil powers Russia, Venezuela, and Angola, says Bradley Parks, executive director of the AidData project at The College of William & Mary.
Implementation was haphazard at best, though. Chinese authorities "signed entrust agreements with the state banks and said, 'Go hunting,'" Parks summarizes. About 330 official sector lenders have some slice of the BRI pie, he reckons. Twenty are involved just in Zambia, the minerals-rich African nation now struggling to restructure debt.
This open lending season produced a few winners. The Greek port of Piraeus has increased traffic more than sixfold under Chinese management, Garlick notes. A Beijing-financed Nairobi airport expressway, opened this summer, looks like a boon for Kenya.
But these are overwhelmed by black holes like the $85 billion in BRI funds dumped into Venezuela. The $125 billion extended to Russia may also be jangling bankers' nerves at the moment. Further down the income chain, Chinese lending has contributed to a "clear and present danger of default" in 10 countries, from Ecuador to Ghana and Laos, Parks says.
The bright side may be that a sobered China is inching toward cooperation on cleaning up these multilateral messes, which grow messier as the dollar soars and the world economy slows. "Enthusiasm for the BRI has reduced significantly," says Kung Chan, founder of Anbound Consulting in Beijing. "Future emphasis will be on 'joint building' with other participating countries."
The prospective poster child for these joint efforts is Zambia, where China has joined Western creditors and the International Monetary Fund in a "Common Framework" to restructure $17 billion in government debt.
Markets hope for a settlement early next year, says Yvette Babb, a portfolio manager on William Blair's emerging markets debt team. "Once we get past Zambia, there are other distressed countries where restructuring is in everyone's interest," she says.
Parks will believe it when he sees it. "China joined the Common Framework in 2020. We haven't seen a single successful restructuring so far," he says.
No epilogue will change the central fact that China swung hard and mostly missed with BRI, Chan says.
"China may forever lose an opportunity to participate in, and to some extent lead, the world market," he says. "This is very unfortunate."
