Contradiction and restructuring in the Belt and Road Initiative: reflections on China’s pause in the ‘Go world’

Abstract

The Belt and Road Initiative (BRI) is a massive Chinese state/capitalist programme of transnational infrastructure construction initiated in 2013. Between 2013 and 2016, Chinese banks extended hundreds of billions of dollars –principally across Asia, but also Europe and Africa – for transportation and energy networks. Recently released statistics, however, suggest that project lending for the BRI collapsed from 2016 onwards. Our paper examines the reasons for this contraction through a case-study of the BRI in Africa. We contend that the lending contraction resulted from political and economic contradictions generated by this form of international interconnection, including the types of debt traps it helped create. This outcome is explained partly by the fact that the BRI is simultaneously a geopolitical and geoeconomic project. Whereas the balance of economic risks is arguably skewed against borrowers (in some cases leading to debt traps), from a geopolitical perspective, the Chinese state also seeks to expand influence in Africa and elsewhere in the developing world. This creates counter-pressure on further expansion of such financing, which, complemented by domestic economic implications of loan failure, helps to explain the contraction.

Keywords:

• Belt and Road Initiative (BRI)
• China
• Africa
• finance
• debt trap
• risk

Introduction

Prior to COVID-19, many observed that China was engaging closely with states in Central Asia and Africa that are generally regarded by Western analysts as ‘fragile’ if not ‘failed’ (see Lee 2017; Owusu, Reboredo, and Carmody 2019; Haass 2020). Andersson (2019) characterised this geographical pattern by labelling it the West’s ‘No go world’. By contrast, we might say, for China these same regions comprise the ‘Go world’, partly as a result of the lack of Western competition: China is going out and reshaping economic patterns.¹

China’s  ‘Go world’ strategy was further formalised via the Belt and Road Initiative (hereafter BRI), first announced in 2013. BRI is complex to characterise, comprising a transnational programme of lending for infrastructure construction and energy production, and policy coordination, amongst other elements. If fully realised, it would result in ∼ US$8 trillion in expenditure (Hurley, Morris, and Portelance 2019).

A fast-growing and vibrant literature examines BRI’s nature and likely effects (limited to 2019–2022, see eg Flint and Zhu 2019; Jones and Zeng 2019; Lin, Sidaway, and Woon 2019; World Bank Group 2019; Xing 2019; Biryukov and Dyuzheva 2021; Carmody, Taylor, and Zajontz 2022; Dzekashu 2021; Murad and Rafiq 2021; Yang 2022; Zajontz 2022b). Given BRI’s scale and complexity, it is understandable that the literature has not arrived at a consensus about its nature or consequences. While most observers broadly agree with the World Bank Group (2019) that BRI has the potential to raise global economic growth and alleviate poverty, in the short term, there are grounds for scepticism, particularly since around 2018 when China’s financing of BRI projects declined significantly. Recently released data (Ray et al. 2020) reveal that overseas lending through China’s two main public banks – the China Development Bank and the Export–Import (EXIM) Bank – all but collapsed. After peaking in 2016 at US $75 billion/year, lending from these banks fell to $4 billion in 2019 (Ray et al. 2020; Wheatley and Kynge 2020). Chinese commercial lending has also declined (Inclusive Development International 2021) and pre-coronavirus, China’s flows of foreign direct investment (FDI) to Africa fell by nearly 50% from 2018 to 2019 (Johns Hopkins University SAIS China–Africa Research Initiative 2021). Total new Chinese loan commitments to the continent fell to only US $7 billion in 2019, down 30% from the previous year (Usman 2021). Why did this occur, and what might it reveal about the geopolitical economy of BRI?

To answer this, we draw upon the existing academic literature, as well as sources from states, non-governmental organisations, and journalists to bring critical political economy to bear on recent experiences of Sub-Saharan African states with BRI loans. In doing so, we aim to contribute to the nascent literature examining the implications of BRI debt for peripheral economies and how this has fed into BRI restructuring (cf. Ameyaw-Brobbey 2018; Were 2018; Gu and Qiu 2019; Bandiera and Tsiropoulos 2020; He 2020; Summers 2020; Dzekashu 2021; Gerlpern et al. 2021; Putri 2021; Manasseh et al. 2022; Zajontz 2022b).

What is BRI? On geopolitics, geoeconomics and capital’s spatial fix

Like all capitalist projects, BRI is driven by capital’s drive for expanded accumulation. But BRI is different from an ordinary capitalist project in three respects. The first, as already mentioned, is its scale. To paraphrase Hegel, the quantitative scale of BRI generates distinct qualities. Through BRI, China is reorganising the economic geography of Eurasia and Africa, effectively re-routing many networks of production and exchange via China’s markets. In the process, BRI generates risks that are distributed unevenly. These risks (elaborated below) are structured differentially by inequalities of power, wealth and opportunity.

This leads to a second distinction from most capitalist projects: BRI strategy is coordinated and regulated by the Chinese state and implemented by a diverse array of actors including national and provincial state-owned enterprises (SOEs), and provincial governments (Wong 2018; Jaros and Tan 2020). While the core finance for BRI is extended through the banking sector, these banks are ultimately governed by leaders of the Chinese Communist Party; hence, BRI must be seen as a state-capitalist project. This is not to suggest total control by the central Chinese state over economic actors. Rather, implementation might be more accurately characterised as ‘directed improvisation’ (Ang 2016),  ‘bounded autonomy’ (Breslin 2021) or ‘hybrid governance’ (McGregor and Coe 2021): different ways of expressing the complexity of China’s political economy. While there are different types of capital originating from China (Camba 2020), globally diversified SOEs seem to adhere most closely to official guidance (Stone, Wang, and Yu 2022).

Third, as a state-capitalist project, BRI is designed to manage an accumulation crisis in China (Carmody, Taylor, and Zajontz 2022). Consequently, its goal is not solely to generate immediate profit. BRI also reflects an ambitious attempt to facilitate China’s continued rise in the international system, while also reducing the risk of capitalist crisis by inducing new patterns of coupled consumption and production.

We join others who interpret BRI as primarily a state-led, capitalist spatial fix or strategy to displace the contradictions of accumulation to other territories through market opening and foreign investment (see Harvey 1982; on BRI as spatial fix, cf. Zhang 2017; Lee, Wainwright, and Glassman 2018). If BRI comprises a spatial fix to problems of capital overaccumulation in China, and if, as Harvey (2011) suggests, these are unstable, then how are its politico-economic contradictions expressed?

We explore reasons for BRI’s contraction with a focus on the interactions between (geo)politics and economics in Africa and China. Our contention is that BRI lending declined because, on the supply side of finance, project failures exposed Chinese political elites to potential blowback – unintended, negative consequences of policy actions (Johnson 2002). Meanwhile, on the demand side, although African elites may have benefitted from the opportunities BRI presented (in the short term; see Table 1), non-elites are often exposed to its negative consequences, sometimes generating pressure to reduce loan demand (see Plummer 2022). Hence, BRI’s rapid lending contraction reflects interactions between its geopolitical and economic consequences and the risks it engendered. This underscores BRI’s status as a complex geopolitical-economic project that aims to address two challenges of realisation: the political realisation of the ‘Chinese dream’ (Xi cited in Lee, Wainwright, and Glassman 2018, 428) and the economic realisation of value to achieve a spatial fix for Chinese-based capital.

Table 1. Potential economic and geopolitical contradictions of Belt and Road Initiative (BRI) loans.

	Short term	Medium and longer term
Impacts on debtor	Boost to economic growth and jobs.	Potential repayment problems and recurring costs.
	Regime maintenance (political business cycle).	Potentially reduced economic growth and reduced regime legitimacy.
	Environmental impacts (and resistance).	Potential political backlash against economic and environmental impacts, opacity and corruption in deals.
Impacts on China	Boost to economic growth.	Exposure to repayment risk and reduced economic growth.
	Domestic and global environmental impacts.	Reorientation of domestic growth model as a result of geopolitical backlash over this and other issues – ‘dual circulation’.
	Maintenance of domestic political settlement.	Maintenance of domestic political settlement.

For some, BRI is a scheme of ‘debt trap diplomacy’,² where the Chinese state entraps other countries in debt to gain strategic leverage over them. For example, Taiwan’s Ambassador to eSwatini, Jeremy Liang, has argued that ‘There is no question that China’s debt-trap diplomacy, as African, Balkan, and South Asian countries have quickly come to discover, is a one-way ticket to poverty and servitude’ (quoted in Madowo 2019). Such claims have been disputed (Bräutigam 2020; Singh 2021), with recent research arguing that overseas projects are generally requested by recipient states for their own ends (Jones and Hameiri 2020). While we agree with this rebuttal, it underplays the strategic coupling of interests³ between Chinese and overseas actors for projects to eventuate. It would be better, in our view, to change the terms of debate. We can reject the notion, in most cases, that the Chinese state is deliberately pursuing debt traps, while also recognising that the BRI generates various forms of risk, potentially reducing spending, and consequently policy space, for borrower countries through time.⁴

Risks are inherent to capitalism. Indeed, the state-coordinated policy system in China encourages overseas loans to alleviate overaccumulation (ie value-realisation crisis) through the deepening of overseas markets.⁵ Debt provides a means to displace crisis tendencies temporally or spatially under capitalism, but it can only resolve them if it transforms economic relations to such an extent – for instance, by accelerating growth to the point of stimulating new rounds of expanded accumulation – if its repayment does not undermine future accumulation (Harvey 2011: Woodley 2020). From this vantage, the debt trap question can be reframed as a matter of social and class power: who benefits from BRI loans, and who suffers, and with what consequences?

BRI debt in Sub-Saharan Africa

Given the relatively small size of economies and high impact of BRI financing, Sub-Saharan Africa provides an important regional frame to examine the effects of debt on its overall trajectory. By some estimates, approximately a quarter of African external debt is owed to China, making it the largest single creditor for the continent (see BBC News 2018; Economy 2022).⁶ China’s EXIM Bank is now thought to be the biggest foreign lender to Africa, but because many of the loans are confidential or ‘off the books’, calculations of overall debt vary. Bräutigam (2019) argues that Chinese loans are a major factor in three countries in Africa: Zambia, Republic of Congo, and Djibouti, although others add Angola to the list as most of its US $20 billion bilateral debt is owed to China (Payne and Zhdannikov 2020). Furthermore, by some estimates Chinese loans to Djibouti account for more than 70% of its gross domestic product (GDP) (Chaziza 2021) – perhaps not coincidentally, given its strategic location and it being the site of China’s first overseas military base.

Each of these debts reflects a financial investment. If the rate of return on debt-funded investments is greater than interest repayments, deflated by inflation – what economists call the external rate of return – then it should be a good investment (at least from an investor’s perspective, if not necessarily socially or environmentally). It may also make sense for states to fund low-return or even loss-making projects that produce widely shared social and economic benefits that offset losses incurred: ie a high social rate of return may justify direct economic losses. For instance, from an economic point of view, it makes sense for a government to pay for a road that accelerates growth and generates employment; the resulting tax income can be used to offset the costs of construction. Concrete projects and economic growth typically increase the government’s popularity, allowing for win–win outcomes (excluding environmental costs). Some research suggests Chinese-funded infrastructure has allowed for integration of African countries into global value chains (Amendolagine 2021), although developmental benefits are disputed (Selwyn and Leyden 2022).⁷

The record suggests however that China’s overseas investments have often failed to meet these benefit criteria. According to Jones and Hameiri (2020, 10):

this loose system of governance [in China], and SOEs’ own inexperience in global markets, have facilitated many poorly conceived overseas projects. In 2006, only half of Chinese overseas investments were profit-making (Zhang 2010, 161). By 2014, Chinese enterprises’ $6.4 trillion of overseas assets were still yielding a net loss (Lu et al. 2016, 198–9) … Thus, irrational investment and surplus capacity at the domestic level are often replicated internationally, creating ‘white elephants’.

Many Chinese-financed BRI projects have under-performed (Economy 2022) and have contributed to weaker macro-economic external positions in Africa. While many African investment environments are notoriously challenging, many Chinese SOEs nonetheless pursue commercial opportunities rather than broader strategic objectives (Barton 2021). ‘Unless African investment financed by Chinese loans generates substantial economic gains that boost debt servicing capacity of Sub-Saharan African governments, the credit implications of such lending include higher debt burdens, weaker debt affordability and weaker external positions’ (Rogovic quoted in IOL Business Report 2018; see also Zajontz 2022b). However, Chinese officials have acknowledged that not all BRI loans are expected to be recouped, suggesting some were given for geopolitical and wider geoeconomics reasons, such as the expansion of Chinese ‘commodity power’ (Dunford and Liu 2019; Kynge 2016 cited in Richardson 2021; Carmody 2017).

As Kaplinsky and Morris (2009) note, the bundled nature of some Chinese overseas engagement is redolent of the colonial approach to trade and investment. One of the signal policies of British and French colonialism was the construction of transport infrastructure in their colonies to allow for raw material extraction and shipment of value-added manufactures to them, while generating revenue for European companies contracted to build the networks. British capital financed much construction of the US rail network (Chandler 1954), although with a different, integrative rather than extractivist spatial patterning, which allowed for market integration rather than fragmentation, as is often the case in Africa (Grove 1993). Thus, politico-economic context is fundamental to determining whether infrastructure will facilitate or constrain economic development.

Where highly productive economic sectors already exist, large-scale infrastructural investment may facilitate exports and increase transport and trade efficiency, yielding high social returns. Where they do not exist, absent other policy measures, infrastructural investment may reinforce colonial-style trade relations: export of raw materials; imports of higher-value manufactures. Given such imbalances, financing the import bill implies additional debt.

When projects are economically unsustainable, depending on their scale, they may become politically controversial, with negative implications for China’s attempts to increase its influence in the Global South. Whereas colonial powers could rely on state violence to enforce extractive social relations, this option is not presently available to China, externally at least. It must employ different strategies to maintain consent and reduce overexposure – including scaling back BRI to dampen its contradictions, and ‘mask diplomacy’, discussed later.

Loss-making Chinese-funded projects, such as the Standard Gauge Railway (SGR) in Kenya (discussed below), led the Chinese president to caution against the construction of ‘vanity projects’ in Africa in 2018 (Reuters 2018). Xi’s admonition reflected a growing concern about the wider issue of non-performing loans in the Chinese banking sector (McMahon 2018), particularly in the context of a slowing economy (Lai, Lin, and Sidaway 2020).

Negative impacts to debtors in Africa

For the sake of analysis, it is useful to distinguish between three types of debt trap risks associated with BRI:

1. Economic. If BRI-funded projects fail (or underperform), debtors must still repay loans with relatively high interest and principal payments. Interest rates on Chinese loans are generally at commercial rates and doubled from 2.5 in 2015 to 5.0% in 2017 (Manuel 2017). Debt payments may jeopardise a country’s economic development or contribute to a debt trap, where loan repayments are prioritised over domestic investments.

2. Geopolitical. If indebtedness to Chinese actors means debtors could face default and must relinquish strategic assets to China, this could generate a geopolitical debt trap where sovereignty is compromised.

3. Political moral hazard. In the context of a competitive electoral system, where future control of the state is dependent upon leveraging resources for campaigning or clientelist distribution, there is an incentive for state officials to seek project loans for short-term political and economic gain – making economic decisions with a high discount rate, to the long-term detriment of the future public good. For instance, some African politicians took out infrastructural loans from China to boost short-term economic growth with a view to the electoral cycle (‘the political business cycle’), while also opening potential for the award of contracts to political allies (Wang and Wissenbach 2019). This has important indirect development consequences, given that the economic benefits of external debts in Africa have been shown to be dependent on governance and institutions (Manasseh et al. 2022).

One common thread is that the positive consequences of the finance peak shortly after receiving the loan while the negative impacts develop in the future (see Table 1).

We now illustrate these costs and benefits across actors and through time via the discussion of two African cases. We focus here on the biggest economy in East Africa, Kenya, and the second biggest in West Africa, Angola. These cases were selected for their economic significance and geographical position in different regions of the continent. Kenya and Angola have substantially different economic profiles: while both economies are export-oriented, Angola is a mono-economy based on oil,⁸ while Kenya has a diversified economic profile, exporting more than 3,300 different products in 2017 (World Bank 2022).⁹ These are relatively large economies by African standards, allowing for a more balanced assessment (as compared to a smaller economy, such as Djibouti). Along with South Africa, Kenya and Angola are the top three recipients of Chinese infrastructure loans in Africa (Quartz Africa 2019 cited in Basu and Janiec 2021). Nonetheless, both Angola and Kenya’s Chinese debt-to-GDP ratios are below the average for the 50 most indebted countries to China, at 15.3 and 12.3% respectively (Narins and Agnew 2022).

Kenya

Seventy-two percent of Kenya’s bilateral debt is accounted for by loans from China – eight times more than its next biggest lender, France (Dahir 2018; see Wang and Wissenbach 2019). Kenya’s debt to China was only US $756 million in 2014, the year that President Uhuru Kenyatta took office, rising to US $6.47 billion in December 2019 (Olander 2020a). Between July and December 2018, Chinese loans accounted for more than one-fifth of total debt service payments for Kenya (National Treasury cited in Muiruri 2019). In part due to the COVID-19 pandemic, Kenya currently faces serious difficulty servicing its foreign debts and may follow Zambia in defaulting on them (Anyanzwa 2020). Much of this debt can be attributed to the SGR, which has generated a substantial backlash in Kenya for a variety of reasons (Solomon 2019). As Zajontz (2022a, 15) explains:

According to Kenya’s Sunday Nation … the loan agreement stipulates that ‘[n]either the borrower nor any of its assets is entitled to any right of immunity on the grounds of sovereignty or otherwise from arbitration, suit, execution, or any other legal process with respect to its obligations under this Agreement, as the case may be in any jurisdiction’ … Generally, Sum (2019, 545), in the context of the BRI, warns against possible long-term effects of ‘loan-debt obligations [which] allow China to renegotiate the terms, collateralize the debt and claim assets/resources by converting debt into equity’.

While the Chinese Foreign Minister refuted accusations of a debt trap on a recent visit to Kenya (Ministry of Foreign Affairs of the People’s Republic of China 2022) and sovereign immunity waivers are standard in such loan agreements (Bräutigam et al. 2022), substantial problems are undeniable. The SGR incurred a loss of approximately US $85 million in its first year of operation (calculated from Muiruri 2019) and continued to take major losses in subsequent years. This led the Kenya Railway Company to default on a payment of US $380 million to the Chinese company that runs it for an undisclosed management fee.

In retrospect, the investment in SGR was highly questionable. The older railway, which ran parallel to it, could have been upgraded at much lower cost (Muiruri 2019), although it might not have been able to accommodate predicted increases in trade volumes (Bräutigam et al. 2022). Furthermore, for ‘every 7.8 tonnes of cargo transported from Mombasa inland on the SGR, only 1.01 tonnes [are] railed back to the port for export’ (Taylor 2020, 42). Many of these imports are high-value commodities from China, with electronics and electrical supplies the top import items to Kenya from China, valued at US $720 million in 2019 (COMTRADE 2021 cited in Plummer 2022).

Furthermore, the price of Kenya’s SGR may have been inflated by 29 billion Kenyan shillings (approximately US $270 million) prior to construction in a ‘cost adjustment’ by the contractor. In addition, there have been numerous corruption scandals associated with the project (Michira 2020; see also Wang and Wissenbach 2019).¹⁰ The China Road and Bridge Corporation (CRBC), which built the SGR, was found to use steel and cement from China despite a local-sourcing clause in the agreement; the firm said the clause was non-binding and local suppliers were unreliable (Basu and Janiec 2021). The construction schedule of the railway was strongly influenced by the engagement of the government executive, dependent on domestic political incentives (Wang 2022). The first stage of the railway was completed ahead of schedule given strong presidential engagement in order to have it completed before an upcoming general election.

This does not necessarily imply that the Chinese government has attempted to entrap Kenya in debt. Such an approach might be counterproductive by generating a backlash amongst Kenyans or state officials (Rana Mitter, personal communication, 24 March 2019). However, debt traps reflect unequal exchange relations of which debt is both a vector (a form of social surplus extraction) and an outcome (Carmody 2020). Kenya has a massive trade imbalance with China, partly facilitated through the SGR, making it harder to repay its external debt (assurances from the Chinese President that this would be corrected notwithstanding). This assurance came after a heated controversy about low-priced Chinese tilapia displacing local fishers, with the Kenyan government temporarily banning its import in 2018 (Plummer 2022). Just as Western aid may ‘succeed’ in creating its own demand through failure, ‘the connected absences, aspirations and ‘failures’ of infrastructure projects become a self-imposed noose that re-establishes a subordinate subject position – one that provokes the subject(ed) to continue to extend imperial invitations’ (Kimari and Ernstson 2020, 837). Given generally close elite interests and connections, some argue that the term ‘debt-trap diplomacy’ should be replaced with ‘debt-trap kleptocracy’ (Jia-Ching Chen quoted in Kimari and Ernstson 2020).

The new railway also generated negative environmental impacts. Kargbo argues (2017),

the Chinese company did their utmost to prevent the ecological environment along the railway from being damaged and effectively protect the vegetation and wildlife. Along the railway there are 14 passages for large animals, 79 bridges and over 100 culverts where wild animals can pass easily, even giraffes do not have to bow their heads.

However, the SGR was environmentally controversial because it runs through the famous Nairobi National Park (Mwanza and Chumo n.d.). Furthermore, the CRBC took 800,000 cubic metres of sand from a reef off the coast of Mombasa without permits, destroying it (Rotberg 2020). Reefs provide rich fish habitats (Ocean Wealth 2022) and its destruction further undermines local fishers’ livelihoods. Possible climate change impacts associated with extractivist-driven development (Kamau et al. 2021), of which the BRI is a part, overfishing and ‘increased cheap imports from China are also to blame for the near-collapse of the marine fish sector at the coast’ (Mwakio 2021). Thus, risks and adverse impacts are primarily shouldered by those who absorb the costs of the mega-projects involved, both directly – through displacement, for example (Kimari and Ernstson 2020) – or indirectly – through other negative political and economic results.¹¹

As Zajontz (2022a) documents, the Chinese ‘infrastructural fix’ has taken on a new guise, as Chinese companies are increasingly involved in infrastructural public–private partnerships (eg road tolling). This allows Chinese construction contractors to obtain business overseas using imports from China, where the costs of the projects are transferred to local users rather than government. If profit repatriation exceeds any domestically retained productivity gains, such arrangements are extractivist.

Angola

The extent of the different BRI loan risks varies across contexts. For example, where there are no competitive elections political moral hazard may be reduced. Angola is often held up as an iconic example of Chinese engagement in Africa and is rated ‘not free’ by Freedom House (2022). Reconstruction after its civil war (ending in 2003) was largely outsourced to China, in the way that external defence was previously outsourced to the Cubans (Soares de Oliveira 2015). Many of the loans to Angola were used for urban (re)construction, such as the notorious one-time ‘ghost city’ of Kilamba Kiaxi where apartments could cost hundreds of thousands of dollars, along with the other new cities of Zango, Cacuaco, KM44 and Capari (Benazeraf and Alves 2014). There are also, however, macro-economic risks for debtor countries arising from resource for infrastructure swaps. The International Monetary Fund and World Bank (2020 cited in Mihalyi et al. 2022) noted that collateralised transactions can be beneficial for developing countries under a range of circumstances but are problematic if the loans are not invested in assets that can repay them. Debt repayment became much more difficult after the collapse of oil prices from 2014 (Cain 2017), which devalued ‘commodity currencies’ such as the Angolan kwanza (Hart-Landsberg 2018). Furthermore, while some claim that the rise of China has empowered African countries (Corkin 2013), the ‘Angola model’ of resource-for-infrastructure swap meant that the country was ‘selling so much oil to the Chinese in exchange for infrastructure that [it] wasn’t selling it for cash on the open market. Since Angola doesn’t really sell much else, it wasn’t able to generate enough actual money [dollars] to circulate in the economy and that triggered a massive spike in inflation’¹² (Olander 2020b, 3), with particularly severe impacts on those living on fixed incomes, such as wages.

The bulk of the contracts for construction of these projects went to Chinese companies;¹³ these firms sourced many of their inputs from China. Despite about 50 Chinese SOEs and 400 private companies operating there, relatively few jobs for nationals were created as localisation rates are generally lower in Chinese firms in construction manufacturing materials and construction, with the notable exception of the 90% usage of national workers in public works construction (Oya and Wanda 2019). This was notwithstanding a bilateral agreement that Chinese companies would employ at least 30% Angolans; the Chinese ambassador said this was ‘unrealistic’ (quoted in Comarmond 2011).

Given the fall in oil prices and the difficulty in repaying the loans, ‘the Angola model … is now regarded not only as unsustainable, but as posing an existential threat to the stability of the Angolan economy and, by extension the Angolan regime’ (de Carvalho, Kopinsky, and Taylor 2022, 2). In 2021 Angola secured three years of payment relief from Chinese creditors, and the Minister of Finance said that in future the emphasis should be on attracting foreign investment (Arnold and Strohecker 2021).

Negotiations over indebtedness and opacity

‘China-powered’ agency for African governments is circumscribed by China’s own strategic interests (Malm 2020). Concerns over debt quality has led China to examine selling off some of its infrastructure debt to private investors (Zacharias 2018), and with the coronavirus pandemic many African governments have petitioned their creditors for debt repayment delays or relief. In response, the Group of 20 (G20) put in place a debt moratorium for low-income countries until the end of 2020. However, debt relief is largely being resisted by world powers (Olander 2020b), and ‘some African governments that are petitioning China for relief say that the country is warily demanding collateral’ (Thomas 2020, 12). In some debt renegotiations China has increased the value of its portfolio (Gardner et al. 2020).

Sovereignty may provide protection to debtors. One review of the available evidence on asset/territory seizures and Chinese debt renegotiations concluded:

despite its economic weight, China’s leverage in negotiations is limited. Many of the cases reviewed involved an outcome in favor of the borrower, and especially so when the host country had access to alternative financing sourced or relied on an external event (such as a change of leadership) to demand different terms. (Kratz, Feng, and Wright 2019)

Much depends upon how loans are structured and where debts are renegotiated. In some cases loan contracts stipulate that arbitration must be undertaken through the Chinese judicial system (Hillman and Goodman 2018), rather than in fora such as the London Court of International Arbitration, which is frequently used. A new branch of a Chinese International Arbitration Centre was set up in Singapore in 2019 to focus on BRI projects (Burton 2019). China has employed other risk-mitigation strategies.¹⁴

China is keen to avoid such defaults for geopolitical as well as economic reasons but can leverage them if needed. When Zambia’s state-owned broadcaster could not afford to switch from analogue to digital transmission, China’s EXIM Bank gave a loan to a Chinese broadcaster to enable a joint venture. This led to a dramatic increase in Chinese programming on the network, increasing China’s ‘soft power’ in that country (Jalloh 2019).

Adding to public suspicion, many BRI loans from China are opaque. A study of 100 BRI loan contracts (Gerlpern et al. 2021) found that most loan contracts include far-reaching confidentiality clauses. Such opacity may facilitate the strategic coupling of elite interests in transnational assemblages while excluding civil society. The Kenyan government’s prospectus for London Eurobond borrowing noted:

During 2017 various ministries and corporations such as the Ministry of Energy and Kenya Power entered into a series of loans with China Exim Bank amounting to $1.2 billion … Such loans mature between 2030 and 2040 and were to be used for funding certain infrastructure and electricity projects. (quoted in Wafula 2019, our emphasis)

Such opacity and vagueness are often politically unpopular, as recent controversies over sovereign immunity waivers in Kenya, Nigeria, and elsewhere have demonstrated (Kazeem 2020). The Chinese state employs strategies to counter this risk of unpopularity. Employees from the Chinese telecommunications giant Huawei, closely linked to the Chinese government, have reportedly spied on opponents of African governments (Parkinson, Bariyo, and Chin 2019), as it moves to create and embed allies on the continent. The Chinese state has also been implicated in hacking scandals at the African Union headquarters, which it built (Abegunrin and Manyeruke 2020; Satter 2020).

Impacts on and risks to China

According to Cannon (2019), China is undermining its rise in Africa through a combination of racism, debt, direct competition with locals and sometimes poor labour conditions and relations at Chinese companies, although others dispute this and argue that criticism of these companies may itself be racist and that it is the neoliberal context that is responsible for poor labour conditions (Sautman and Yan 2014; Lee 2017). Recent bans on Africans entering some Chinese restaurants in Kenya and other facilities (such as hospitals in Guangzhou during the COVID-19 pandemic) have also strained relations and brought greater scrutiny to Chinese loans on the continent (BBC 2020).

Overseas political risks could dampen economic growth in China and put pressure towards a change in the governing system, although this could be violently repressed as has been the case in the past (Hart-Landsberg 2018). Whereas the spatial displacement of contradictions of capital accumulation may often take years or decades to mature, in BRI they have emerged quickly, given the scale of overaccumulation and overseas projects, its impacts on smaller economies particularly, and loose investment appraisal given its partially geopolitical impetus. Even if the primary motivation of BRI was as an economic fix to problems of high savings in China (a remarkable 37% of household disposable income in 2015 [Klinger and Muldavin 2019]) contributing to the over-accumulation of capital, the economic and political risks generated were too great, explaining why limiting financing risk is one of China’s ‘three tough battles’ announced by President Xi in 2018 (Gerstel 2018).

Loans given under the auspices of BRI went to either Chinese or foreign firms and governments. As Liu, Zhang, and Xiong (2020, 4) explain:

Given the difficulties Chinese firms face in getting domestic loans to invest abroad, we estimate that loans to Chinese firms account for no more than two-thirds of China’s FDI stock, suggesting that about 66 percent (US $236 billion) of the outstanding loans of Chinese banks in the Silk Road countries was made to sovereign institutions or firms in these countries.

Some risks for the debtor countries have also been evident in China itself. One study of infrastructure projects in China found that they have ‘a detrimental effect on the economy because in most cases projects assume massive debt that leads to economic fragility’ (Ansar et al. 2016 cited in Plummer 2019, 680).¹⁵ Johnston (2019, 52), in contrast, argues that BRI is in part a risk-mitigation strategy to diversify ‘international investment away from what are presently low-yield [American] bonds’.

According to Gonzalez-Vicente (2019, 449), risk may be reduced where diplomatic good faith exists between governments. Where governments ‘underwrite’ specific deals, they are considered more trustworthy partners than private companies, given the state’s ability to maintain long-term debts and mobilise resources to pay for them. However, China is not immune to the structural power of transnational capital. Concerns about debt explain Standard and Poor’s downgrading of China’s credit rating from AA − to A + in 2017 (Parrington 2017 cited in Sum 2019). Even prior to the pandemic, Moody’s credit rating agency gave Belt and Road countries a median investment rating of Ba2 (which constitutes ‘junk’; Kynge 2018 cited in Patey 2020). Reductions in loan demand in more democratic or developmental states have also contributed to reduced supply.

Conclusion

BRI lending to Sub-Saharan Africa has declined and is being restructured. The reduction in supply of new loans through BRI, we have argued, reflects the complex and combined geopolitical-economic nature of the project, contradictions in transnational capital accumulation, and conjunctural events. While the exact developmental outcomes of BRI projects vary by context (Jepson 2020) and may be overwhelmed by other factors such as local government policy and implementation, the thrust of these projects was grounded in the re-centring of China in global production and trade and, consequently, new forms of dependence through mechanisms such as debt and unequal trade relations. Like World Bank attempts to ‘[push] money out the door’ (Bugalski and Pred 2014),¹⁶ poor investment appraisals of overseas Chinese projects, particularly given the political drivers of many projects (Reboredo 2019), plus the moral hazard of negative incentives generated sufficient project failures to lead China’s state to sharply reduce lending:

While the lack of transparency and oversight as to what China is doing abroad was a boon in the early years of the Belt and Road, the initiative has lost support amid the scandals, debt traps and failed projects that have emerged in recent years. Countries along the corridors are now … pumping the breaks [sic] on many projects and potentially setting the BRI back for years to come. (Shepard 2020)

Many overseas Chinese projects are loss-making, and in some cases loan delays put Chinese firms and labour under pressure (Chen 2020). Yet this may not be indicative of an overall lack of success of the Chinese approach to economic policy. At one point in time, around 40% of economic policies in China were said to be experimental (United Nations Development Programme 2013). Learning what works through testing is a rational approach to development (Cramer 2016) or foreign economic policy. This Chinese approach to foreign economic policy can be understood as an ‘experimental sovereignty regime’: crossing the oceans by feeling for the stones, to paraphrase Deng Xiaoping, with the goal of extending China’s political and economic rise (Carmody, Kragelund, and Riboredo 2020).

The indebtedness generated by BRI loans coupled with their emphasis on facilitating infrastructural changes for outflow of primary commodities has raised memories of colonialism for many African observers. In fairness, BRI differs from colonial projects structurally – China is not claiming sovereignty or settling formal colonies in Africa – and in terms of its financing (still dependent on the US dollar; Summers 2020). Still, there are similarities, particularly when we consider BRI as a response to capital overaccumulation.

We should remember that the strategic impetus in any spatial fix is to resolve or displace the territorially expressed contradictions of capital accumulation at its centre. On the demand side, evidence suggests that many projects requested by recipient countries are more politically (including opportunities for corruption and short-term economic growth) than developmentally oriented. Now the delayed rebalancing of the Chinese economy away from investment towards consumption has come back into vogue through President Xi’s ‘dual circulation’ strategy, which places greater emphasis on domestic production and consumption. This strategy was partly a response to trade tensions with the US and domestic concerns over wasteful overseas spending (Economy 2019; Yao 2020).

BRI is too important a programme and ‘brand’ to be abandoned completely, and China has invested heavily in the ‘Go world’ for its continued ascent. Nevertheless, BRI is being restructured through the greater use of public–private partnerships (Zajontz 2022a) and ‘sellers’ credit’, or loans given directly by Chinese firms – sometimes for distributed renewable energy projects for example, which are less capital intensive (Lui 2021). These changes have led some observers to argue that China is doing more but spending less in Africa (Olander 2020c). Chinese investors are also more ‘bullish’ on Asia than Africa (Olander 2021). Regardless, given its combined geoeconomic and geopolitical impetus – and the different types of debt traps it may be implicated in – BRI inherently exposes the Chinese economy and state to risk, even though there are local benefits to BRI construction (Liu and Qiuhui 2021): hence the present phase of contraction and restructuring, with an announcement of a reduction of official lending to Africa and a refocusing on smaller more bankable projects announced at the most recent Forum on China–Africa Cooperation (Niabiage 2021).

As project lending has decreased, the number of scholarships to China for African students has increased (Benabdallah 2019), showing an increased importance of the ‘people-to-people exchange’ vector of the BRI. During the COVID-19 pandemic, China has also engaged in what some have called ‘donation diplomacy’ of personal protective and other equipment across the continent, or what some have referred to more cynically as ‘mask diplomacy’ – masking its ambition to increase influence (Aidoo 2020). Sixty-three percent of respondents to an Afrobarometer survey view China as having a ‘somewhat’ or ‘very’ positive impact in their country (Afrobarometer 2021). Maintaining such general approval is important to the Chinese government as engagements with Africa shift from a primarily economic to a more geopolitical focus (Carmody 2021). Restructuring BRI will also help mitigate risk and burnish China’s image in the ‘Go world’.

Acknowledgements

Thanks to Will Jones, Francis Owusu, Kefa Otiso, Ricardo Reboredo, Tim Zajontz, our anonymous journal referees, and editor Jing Gu for their comments, which substantially improved the paper. Any errors are ours.

Disclosure statement

No potential conflict of interest was reported by the authors.

Additional information

Notes on contributors

Pádraig Carmody

Pádraig Carmody is Professor of Geography at Trinity College Dublin (TCD) and a senior research associate in the School of Tourism and Hospitality at the University of Johannesburg. At TCD, he directs the master’s in development practice and CHARM-EU. His research centres on the political economy of globalisation in Africa and he has published several books, including The New Scramble for Africa (2nd ed., Polity, 2016), The Rise of the BRICS in Africa (Zed, 2013), Africa’s Information Revolution: Technical Regimes and Production Networks in South Africa and Tanzania (with James Murphy; Wiley-Blackwell, 2015) and Africa’s Shadow Rise: China and the Mirage of African Economic Development (with Peter Kragelund and Ricardo Reboredo; Zed, 2020).

Joel Wainwright

Joel Wainwright is a professor in the Department of Geography at Ohio State University where he studies political economy, the politics of climate change, and social theory. He is the author of Decolonizing Development: Colonial Power and the Maya (Oxford: Blackwell, 2011), Geopiracy: Oaxaca, Militant Empiricism, and Geographic Thought (London: Palgrave, 2013) and Climate Leviathan: A Political Theory of Our Planetary Future (with Geoff Mann; New York: Verso, 2018). He edited Israel/Palestine: Marxist Perspectives (New York: Routledge) with Oded Nir. He is presently writing a critical history of Belize with Assad Shoman.

Notes

1 A play on the English translation (‘Go’) of the famous Chinese strategic board game (围棋).

2 On this concept, cf. Singh (2021); Carmody (2020); Carmody et al. (2021).

3 This can be seen discursively in the ‘Go East’ policy of Robert Mugabe when he was Zimbabwean president, mirroring the Chinese government’s ‘Go West’ and ‘Go Out’ policies.

4 One study of 1814 BRI projects found that roughly 270 had problems relating to debt, corruption, national security, and labour and environmental standards (Kynge 2018).

5 While it is often argued that many Chinese state-owned enterprises are partly privatised or commercialised and consequently operate like Western corporations, Topfer (2018, 267) argues that the Chinese state ‘shapes which corporate players are able to emerge as “lead firms” in the first place’.

6 Approximately half of China’s official lending to developing countries is not reported to international organisations, leading to considerable underestimations of its overseas debt (Horn et al. 2020). This is largely the result of a lending system undergoing improvisation and adaptation (Lui and Chen 2021).

7 Chinese companies sometimes undercut other bidders for projects by paying workers directly into their bank accounts in China at less than local national minimum wages, while the Chinese state receives the tax benefit (see Gonzalez-Vicente 2019; Lee 2017).

8 Oil accounts for more than 30% of Angola’s GDP and more than 90% of exports (World Bank 2021).

9 Indeed, Kenya has one of the most diversified export baskets in the world, coming in at number 151 in the export diversification index; by contrast, Angola (in seventh place) is one of the least diverse (Knoema 2017).

10 Some studies find strong relationships between the presence of Chinese aid-funded projects and corruption (Brazys, Elkink, and Kelly 2017; Isaksson and Kotsadam 2018).

11 There are also other environmental and social costs to projects. For example, BRI projects affect existing communities, such as the approximately 16,000 people displaced by the Soupati dam in Guinea (Human Rights Watch 2020). Resistance has also led to the need for increases in Chinese private security firms, which are often headed by retired army officers (Hart-Landsberg 2018), thereby still retaining the façade of ‘non-interference’ in Chinese foreign policy.

12 If there is a dollar shortage the local currency depreciates in value against it, raising the local cost of imports, causing inflation.

13 Approximately 90% of contracts for BRI projects have gone to Chinese companies (Hillman 2018 cited in Wani 2020).

14 Gerlpern (2021, 6) found that 30% of the contracts ‘require the sovereign borrower to maintain a special offshore bank account … that effectively serves as security for debt repayment … pos[ing] significant challenges for policymaking and multilateral surveillance’.

15 BRI, then, was perhaps partly a form of spatial projection, where domestic policy approaches are extrapolated to other contexts without an appreciation of spatial differences.

16 The timing of this renewed downgrading of social and environmental standards – the year after the announcement of BRI – is perhaps not coincidental, because Western donors and dominated institutions converged on Chinese approaches to promote an ‘infrastructure-led’ development regime (Schindler and Kanai 2021).