The past two years have not been kind to the Belt and Road Initiative, the signature infrastructure project of Chinese President Xi Jinping. First, the United States labeled the initiative a “debt trap”—a loan-shark scheme for luring poor countries into economic vassalage—and began to pressure its allies and partners to stay away. Then came COVID-19. Last summer, China’s Ministry of Foreign Affairs admitted that as much as 60 percent of Belt and Road projects have been impacted to some degree by the pandemic. That figure is surely higher now. New Chinese overseas lending has fallen precipitously. This year, as low-income countries face a debt crunch, Chinese lenders could take enormous losses.
But the Belt and Road Initiative hasn’t died of COVID-19. On the contrary, Xi and other senior Chinese officials continue to trumpet the initiative. Their messaging is highly consistent: In 2021, China will start to wind down its new investment into traditional capital-intensive infrastructure, both at home and abroad. In that way, the pandemic provides an excuse to cut losses on unviable projects. Instead, the initiative will refocus on public health (especially vaccines), green technology, and digital services. This fresh-faced Belt and Road—higher-tech and more geared toward trade than investment—will fit neatly into China’s new “dual circulation” economic concept, which emphasizes Chinese domestic consumption. It will also be more attractive to partner countries than its previous incarnation.
