The Belt and Road Initiative (BRI) is a strategic initiative proposed by the Chinese government. From the market perspective, though 64 countries along the BRI have abundant natural resources and energy reserves which provide a solid foundation for economic development, they do not have sufficient development. This is therefore in line with the demand for China's external production capacity and opening up the space for international production capacity cooperation. The BRI provides business opportunity for enterprises, especially the local and private enterprises to expand their business globally; at the same time it also provides a potential investment platform for foreign enterprises.
However, in its attempt to face the world, the increasingly powerful China has encountered some notable problems both domestically and abroad. From the constructive point of view, one of the problems in carry out the BRI is that the composition of the participants is relatively unitary, in which the state-owned enterprises are still taking the lead.
During the media briefing on the construction of the BRI by state-owned central enterprises on October 30, the deputy director of State-owned Assets Supervision and Administration Commission of the State Council (SASAC), Weng Jieming, said that the state-owned central enterprises have undertaken 3,116 projects along the BRI. Among the planned and started infrastructure projects, the number of projects undertook by state-owned central enterprise accounts for about 50%, and the contract value accounts for more than 70% as a whole. By the end of 2017, there were 10,791 state-owned central enterprises in 185 countries and regions, with total overseas assets exceeding RMB 7 trillion, annual operating income of RMB 4.7 trillion and net profit of RMB 106.4 billion. Based on the proportion of the contractual amounts and the number of the projects undertaken, the state-owned central enterprises have been in a dominant position in the construction of the BRI. If added local state-owned enterprises in this consideration, the BRI might be perceived as "The BRI of China's state-owned enterprises".
How does an open BRI form the pattern of being dominated by state-owned enterprises? Is that because it is actively participated by the state-owned enterprises, while the private enterprises are lack of interest to follow up? In reality, besides the active responds to the national strategic initiatives, the large-scale participation of state-owned enterprises is mainly due to the design and arrangement of projects in the BRI. According to the information, the relevant government departments in China mainly considered state-owned enterprises rather than private enterprises when they devised the BRI projects, mainly based on the project arrangement and the financial support.
On the one hand, the design of the BRI projects was mainly focused on the infrastructure construction in which the state-owned enterprises are best at. For examples, Indonesia's first high-speed rail – Jakarta to Bandung project, with an investment of US$ 5.13 billion, is jointly operated by China Railway International Corporation, a subsidiary of China Railway Group, and Indonesian state-owned enterprises. The standard railroad project from Mombasa to Nairobi has an investment scale of approximately US$ 3.8 billion and is built by China Road and Bridge Corporation. The Ethiopia-Djibouti Railway Project is jointly operated by China Railway Construction Corporation and China Railway Group. The Karot Hydropower Station in Pakistan is the first investment project of the Silk Road Fund and it is operated by the South Asia Investment Co., Ltd., a subsidiary of China Three Gorges Group. The Laos Nam Ou Hydropower Project is the first overseas development planning project by Chinese enterprise outside of China, with the investment scale of about US$ 2.8 billion and operated by Power Construction Corporation of China.
On the other hand, financial resources from China have also been invested in capital-intensive infrastructure construction. According to the data provided by the Moody's report, as of the end of 2016, the amount of China's domestic financial institutions financing the BRI projects has exceeded US$ 750 billion, far exceeds the international financial institutions' financing scale for BRI project. At the end of 2016, the Export-Import Bank of China has provided a loan balance of US$90 billion for 1,200 projects related to the Belt and Road Initiative, accounting for 1/4 of the total loan amount of the bank; 302 projects of CDB provided a loan balance of US$115 billion, accounting for 35% of its international loan balance and 8% of the total loan; commercial banks such as CCB, ABC, ICBC and BOC provided loans of US$6 billion, US$ 2 billion, US$ 67.4 billion and US$100 billion respectively. From 2013 to January 2017, China Export and Credit Insurance Corporation provided US$ 422.1 billion in financing and guarantees for the BRI project.
Since the BRI is mainly based on infrastructure projects, these capital-intensive projects often require a large amount of financing. Without doubt, it would easily result the increase of debt in participated countries. Therefore, the debt problem caused by the construction of infrastructure often results in the resentment of by local governments and people. For instance, considering Malaysia's current national debt problem, Malaysian Prime Minister, Tun Dr. Mahathir bin Mohamad has cancelled the Chinese-funded East Coast railway projects and two energy pipeline cooperation projects due to Malaysia has no way to bear high costs at current stage. Pakistani Railways Minister, Sheikh Rasheed Ahmad also claimed that the Pakistan is a poor country that cannot afford huge burden of the loans. In addition, China's loans in Zambia have also caused dissatisfaction among local people. Locals believe that part of the monthly 10 kwacha (around $0.86) television fee they paid was used to repay the $273 million loan borrowed by the state-owned Zambia National Broadcasting Corporation from the Export-Import Bank of China.
At present, the problems of the BRI are actually related to the dominant position of China's state-owned enterprises in the projects. Under this structure, private enterprises have less participation, while the foreign enterprises' participation is even lesser. They are not unwilling to participate, but the barrier of participation is relatively high for them. In term of the project financing, in 2017, China announced that it will contribute additional RMB 100 billion to the Silk Road Fund. The China Development Bank and the Export-Import Bank of China will raise RMB 250 billion and RMB 130 billion accordingly for a fund to specifically finance the BRI projects. To this, some private entrepreneurs hope that relevant parties will be able to treat state-owned enterprises and private enterprises equally in the process of implementing these policies and measures.
It can be seen that the BRI tends to be skewed towards state-owned enterprises. Meanwhile, Chinese private enterprises are also investing overseas, yet instead of infrastructure projects, private enterprises are more inclined to invest in the sectors of consumption, electronics, finance, and sharing economy. Private enterprises have invested a lot in these sectors, yet because such sectors are closer to the consumer, people's lives, even if such investments take control of local related companies, they did not cause local resentment; on the contrary, they are highly accepted in the investment countries. From the perspective of project investment, this reflects the people in related countries do not perceived the benefits from the state-owned enterprises and infrastructure that dominate the BRI projects, even though China has invested a lot of resources.
Final analysis conclusion:
The state-owned enterprises which dominate BRI projects is a structural problem that increases the difficulty for private and foreign enterprises to participate; it also generates debt burdens in participating countries, which is not conducive to the sustainable development of the BRI.
