China’s Belt and Road Initiative (BRI), sometimes called the New Silk Road, was one of Beijing’s most ambitious infrastructure projects ever. Launched in 2013 by President Xi Jinping, China aimed to expand from East Asia to Europe, greatly expanding China’s economic and political influence.
However, Beijing’s bid to take over the world with its ambitious initiative seems to be drawing its last breath and would succumb anytime soon. Chinese President Xi Jinping is said to have minimized the mention of his favorite project in his speeches and we know exactly why.
BRI – Collateral Damage of the Russian War
BRI died like a dodo. Yes, you read that right. For the CCP, this is no longer important. According to the diplomat, the Belt and Road Initiative, often referred to as the “project of the century”, is gradually disappearing from the statements of Chinese leaders more than ten years after its introduction.
emerging savings appear to be struggling due to the pandemic, rising interest rates and soaring food and energy prices following Russia’s special operation in Ukraine. Today, many of these countries are part of China’s BRI and are struggling to repay their debt. This brings new problems for Beijing, which is likely to encounter more problematic loans.
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According to the International Monetary Fund, the foreign exchange reserves of these countries fell by around 5% between December 2021 and June 2022, the largest half-year decline in around six years.
Xi has invested in emerging countries in many parts of the world. The majority of these debts have been extended to countries with stable finances and those from which Beijing could extract strategic value in the future.
Understandably, China was eager to control the local affairs of the beleaguered nations due to their debts. However, cases of rebellions against the Chinese BRI in Africa and Latin America have been reported in the news in the past. Even if the Chinese fail to exert direct control, they would still have considerable influence due to their substantial investments.
Although the last pillar that the Chinese relied on – the yield on extended debt has now turned bad in the majority of these countries.
According to estimates by US think tank Rhodium Group, China is seeing an increase in cases of renegotiation of interest payment waivers and other loan terms. He reportedly had 9 cases in 2019, but the number rose to 21 in 2020.
These renegotiations included $52 billion in total for 2020 and 2021, more than triple the $16 billion of the previous two years, as emerging economies were badly hit by the COVID-19 pandemic.
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So, in conclusion, Beijing has finally lost the lion’s share of its investments in foreign countries. China has lost a substantial share of those investments in Pakistan and Sri Lanka as the two countries have fallen into a deep financial hole in recent months.
As a result, China is scaling back its expansive lending initiative. According to World Bank data, Beijing’s new lending to lower-middle-income countries totaled just $13.9 billion in 2020, down 58% from the 2018 record.
China would now invest its surplus to focus on domestic demand. Its plan to become a superpower was cancelled. You see, China’s real estate and banking sector is struggling, the economy is approaching stagflation, and confidence is declining. It’s more than convenient for the Chinese to let go of a project they can’t really support.