The Belt and Road Initiative: Assessing Shifting Attitudes

Comprised of the Silk Road Economic Belt and 21st Century Maritime Silk Road, the Belt and Road Initiative (BRI) is a US$1 trillion Chinese scheme aimed at developing integrated trade corridors across Asia, Europe, Africa, and the Middle East. Under the BRI, China is expanding its domestic and overseas investment in transport, as well as the associated energy, power, and industrial infrastructure required to strengthen trade links.

In December 2014, China established the US$40 billion Silk Road Fund to finance the BRI. The introduction of the China-led US$100 billion Asian Infrastructure Investment Bank in January 2016 has also supported the initiative. To date, 170 agreements have been signed with 125 countries, totalling US$90 billion in investment. In March 2019, Italy became the first G7 country to join the initiative.

BRI was not conceived as an aid programme - the Chinese government aims to reap political, economic, and financial benefits from its investments. By financing capital-intensive infrastructure projects abroad, China is working to relieve domestic overcapacity in steel, cement, coal, and other sectors. To date, most lending under BRI has been conditional on the involvement of Chinese companies, whether in construction, operation of projects, or supply of materials. By financing overseas projects, China also aims to loosen links to the US dollar, diversify foreign-exchange reserves, and build the renminbi as a global currency.

However, since its inception six years ago, many countries have shifted their attitudes regarding BRI. While participating countries still recognise the value of Chinese financing that comes without conditions of economic or political reform, they have increased their scrutiny of the initiative. Criticism of BRI has focussed on corruption allegations, onerous financing terms, rising BRI-related debts in participating countries, and weak project implementation.

In this paper, we outline the shifting attitudes to BRI and assess recent developments in Bangladesh, Indonesia, Malaysia, Myanmar, and Philippines. We also provide an overview of the cover and capacity available in the private political risk insurance market, which may be used to address key risks in BRI markets.