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China's investments in Belt and Road Initiative countries drop in H1

posted onJuly 28, 2021

Data for Chinese investments in the 140 countries of the Belt and Road Initiative (BRI) show that overall financing and investments in the BRI continued to drop in the first half of 2021 to US$19.3 billion compared to US$27.5 billion in the first half of 2020.

This is  a decline of 32% compared to the second half of 2020 and is also US$44 billion less compared to the peak in BRI financing in the second half of 2019. The data were released by the Chinese Ministry of Commerce (MOFCOM) on June 28, 2021.

With continued lockdowns, BRI investments were at their slowest pace since Beijing adopted  its flagship infrastructure project  coined “Belt and Road Initiative” in 2013 to invest in countries and international organizations. Examples of Belt and Road Initiative infrastructure investments include ports, roads, railways and airports, as well as power plants and telecommunications networks.  

According to the official outline, BRI aims to “promote the connectivity of Asian, European and African continents and their adjacent seas, establish and strengthen partnerships among the countries along the Belt and Road, set up all-dimensional, multi-tiered and composite connectivity networks, and realize diversified, independent, balanced and sustainable development in these countries.” 

However, BRI is believed by some analysts to be a way to extend Chinese economic and political influence.

The focus of BRI investments in the first six months of 2021 continued to be in infrastructure, particularly energy and transport. The share of financing and investments in these two sectors, however, decreased slightly from about 72% in the first half of 2020 to 65% in the first half of 2021.  

Chinese Investments in Belt and Road Initiative 2013-H1 2021

(Source: The Green Belt and Road Initiative Center)

No coal projects received financing or investments in the first half of 2021. Green energy finance and investments in H1 2021 dropped by 90% compared to H1 2020. Oil-related finance and investments in the BRI have been US$1.4 billion in the first half of 2021 alone (compared to US$1.9 billion in all of 2020). The average deal size is getting smaller, dropping from US$1.3 billion in 2018 to US$0.55 billion in 2021. 

Looking ahead, for the second half of 2021, the Green Belt and Road Initiative Center  expects Chinese BRI investments to accelerate slightly with a focus on transport in Asia, resources and other strategic assets (e.g. ports).

The Center, also sees potential for increasing demand for Chinese overseas investments due to the possibility of a post-COVID-19 recovery and an acceleration of green projects and finance, also due to the “Guidelines for Greening Overseas Investment and Cooperation”, issued by the Ministry of Commerce (MOFCOM) and the Ministry of Ecology and Environment (MEE) on July 16.

For 2021, the Center continues to see better opportunities in investing in smaller projects that are quicker to implement (e.g. solar, wind) and an opportunity to cut losses in large and often loss-making projects (e.g. coal). 

The Green Belt and Road Initiative Center is part of the International Institute for Green Finance (IIGF) of the Central University of Finance and Economics (CUFE) in Beijing.

Globally, Foreign Direct Investment (FDI) flows dropped 38% in 2020 to $846 billion, the lowest level since 2005, so it's no surprise that Chinese investments in the countries of the BRI fell.  

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