New Delhi: China’s investment and spending in foreign countries through its major infrastructure development plan, the Belt and Road Initiative (BRI), fell 11.77 percent during the first half from 2022 from year to yearaccording to data from the Chinese Ministry of Commerce (MOFCOM).
Countries like Russia, Sri Lanka and Egypt saw no BRI investment in the first half of 2022, while Pakistan saw its funding drop by 56%. Saudi Arabia has become the biggest beneficiary, according to a July 2022 assessment report from Fudan University Green Finance and Development Center.
In the first half of 2021, MOFCOM data revealed that China’s BRI investments cumulatively amounted to $84.2 billion, while for the same period in 2022 that figure fell to $74.74 billion. .
Additionally, with the energy sector accounting for the majority of BRI investments, Saudi Arabia was the biggest beneficiary in the first half of 2022. The oil-rich kingdom received $5.5 billion during this period. .
The BRI was launched in 2013 by President Xi Jinping, and since then nearly $932 billion has been spent on it, the report adds.
Investment data for the BRI is difficult to assess, as there remain multiple structures and vehicles through which funds are disbursed. Like the British think tank Chatham House evaluated, there is a “lack of transparency around its funding”. However, data from 2022 suggests that there are new priorities for the BRI.
“A temporary blow for investments in Russia”
The lack of BIS investment in Russia this year could be a consequence of the war in Ukraine. With China keen to avoid Western sanctions, it has tactfully avoided further BRI engagements in Russia this year, Christoph Nedopil Wang – director of Fudan University’s Green Finance and Development Center – wrote in the FinancialTimes.
Although China has not invested through the BRI in Russia this year, it has purchased much larger volumes of oil from the country. In May of this year, Russia became China’s largest source of oil, replacing Saudi Arabia. The two state-owned refiners Sinopec and Zhenhua Oil bought barrels at a discount from Russia.
Further, China invested almost $125 billion in Russia between 2000 and 2017, including investments via the BRI. The two states also have currency exchange mechanisms for bilateral trade since 2014.
Overall, the Sino-Russian partnership rests on solid foundations. Prior to his invasion of Ukraine, Russian President Vladimir Putin classified the strategic partnership between the two as a “limitless”.
While BRI investments may be on a limited scale for now, this blow is only “temporary”, according to Nedopil. In the long term, they will continue to flow to Russia from China.
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CPEC temporarily on hold?
When the BRI was launched in 2013, the CPEC (China-Pakistan Economic Corridor) was its flagship and most ambitious project. Described by scholar Claude Rakisits in the journal International affairs as “the jewel in its crown”, it was meant to be a one-stop solution for Pakistan’s energy, infrastructure and economy. However, nine years of CPEC have been marred by delays and controversy.
In 2022, Chinese investment in CPEC fell by 56 percent, the Green Finance and Development Center report pointed out. Moreover, even before this year, Chinese investment in Pakistan had declined. In 2021, Pakistan received $76.9 million for the quarter that ended in September, compared to $154.9 million for the same quarter in 2020.
“Chinese investment in CPEC has been slowing down for a few years. There are several reasons for this. First, the first wave of funding came during the first phase of CPEC, when projects were announced between 2013 and 2015,” Sushant Sareen, a senior researcher at Delhi-based think tank Observer Research Foundation, told ThePrint.
The next phase of investments was to start after the completion of the first round projects. However, the inability to complete these projects and bloated budgets have hampered future investments, Sareen added.
Protests by the inhabitants of Balochistan against the flagship project of the port of Gwadar, violence against Chinese operators, severe project delays, payment defaults, losses and a host of Corruption scandals derailed the CPEC.
“Essentially, Chinese companies seem to be losing the appetite to invest in Pakistan.” However, given the close strategic ties between China and Pakistan, CPEC will continue to attract investment, albeit slowly. Consider the project temporarily on the back burner, Sareen said.
Saudi Arabia — The New Pivot of the BRI?
China and Saudi Arabia elevated their ties to a comprehensive strategic partnership in 2016. In 2021, the kingdom was also China’s largest oil supplier. The two countries also held joint military exercises in 2019. Given the growing importance of bilateral relations, the kingdom has slowly become an essential part of the BRI.
In the first half of 2022, Saudi Arabia was China’s largest investment recipient with $5.5 billion. About $4.6 billion of that $5.5 billion investment went towards oil and gas projects in the Gulf state. In addition, oil and gas investments accounted for nearly 80% of BRI financing for energy projects, the Green Finance and Development Center report added.
In addition, energy investments have also made Saudi Arabia the fourth partner for energy engagements with China since the launch of the BRI in 2013.
Looking at the larger geopolitical situation, “Saudi Arabia’s relationship with the United States is anything but warm. Sensing an opportunity to solidify its position in the region, Beijing redirected BRI funding to ride geopolitical exchanges,” a report published in Asia time Explain.
For China, the BRI is a tool to increase its presence and its notoriety. And – beyond the energy economy – the pivot to Saudi Arabia is just that, Sareen said.
(Edited by Siddarth Muralidharan)
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