China's Belt and Road Initiative is one of the most ambitious infrastructure and trade expansion programmes ever undertaken. It involves 1,800 projects in 138 partner countries that account for 40 per cent of the world's population and 15 per cent of its GDP – numbers likely to grow even larger.
The initiative comprises a 'Belt' of six overland corridors tracking the old Silk Road between central Asia and Europe, and a maritime 'Road' of shipping lanes. Most partner countries are along these routes but the network extends to Africa, Latin America and the Caribbean and European countries include Poland, Portugal and now Italy.
It includes railways in Brunei, Laos and Nigeria, ports in Djibouti and Greece, and bridges in Croatia and Bangladesh. A wind farm in Chile, a potash plant in Bolivia and a dry dock in Trinidad & Tobago are among the projects. And as the belt-and-road expands, its impact on world trade and the global economy will only grow.
Estimates of the scale of investment over the six years since its launch range from USD120 billion to USD575 billion – though some suggest USD1,000 billion. Finance comes from Chinese policy banks, sovereign wealth funds and could increasingly include green bonds. So far, most projects involve energy and infrastructure development but there is now a growing emphasis on manufacturing and even services.
The belt-and-road has had a dramatic impact on international infrastructure development. China is now a net provider of foreign direct investment flows to the rest of the world and is already spurring more flows of goods, labour and capital between itself and its partners.
But for many partners it promises not just greater connectivity with China but also other countries along the corridors. Weak infrastructure can seriously impede trade flows, sometimes proving more costly to businesses than tariffs. Belt-and-road projects could lift global trade volumes by 1.7 per cent by 2030, according to the World Bank, with improved infrastructure attracting further investment from other countries as well as leading to improved governance and environmental policies.
The World Bank also suggests that stronger regional and global growth resulting from new trade corridors could lower the share of the world's population living in extreme poverty from 9.5 per cent in 2015 to 3.9 per cent by 2030.
The initiative is not without challenges, including corruption and cross-border disputes. Low-income countries must find the right balance between providing vital infrastructure and exacerbating already high debt. They also need to improve human capital and enhance productivity to ensure the growth is sustainable and the debt can be financed.
Some ambitious projects have had to be refinanced, renegotiated, deferred or have loans written off, but one clear economic success is the USD8.75 billion investment in Greece's Piraeus Port since 2008, bringing it under the BRI umbrella. Piraeus is now the second-largest container port in the Mediterranean.
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