China’s Belt and Road faces European retreat over debt and dependency fears

China’s Belt and Road faces European retreat over debt and dependency fears

China’s Belt and Road Initiative (BRI), once a major attraction for European investment, is now facing a decline in enthusiasm from European stakeholders. Launched in 2013 by President Xi Jinping, the BRI sought to expand China’s economic and strategic influence globally by reconstructing the ancient Silk Road trading routes. The initiative proposed extensive infrastructure development and investment in countries across Asia, Europe, and Africa.

Initially, many European countries viewed the BRI as an opportunity to enhance their economic ties with China and benefit from infrastructure development. However, recent years have seen a cooling of interest, driven by a complex mix of economic, geopolitical, and strategic factors.

Italy’s decision to formally withdraw from the Belt and Road Initiative (BRI) dealt another setback to Chinese President Xi Jinping’s hallmark international strategy.

Economic and financial concerns

• The economic allure of the BRI has been tarnished by instances of financial mismanagement and the debt sustainability of the participating countries. Many projects under the BRI umbrella have faced criticism for favoring Chinese companies and labor without sufficiently benefiting the local economies.
• “European investment in BRI has definitely seen a slowdown, and this trend is likely to continue,” Zhang Li, an economic analyst from Shanghai, told the South China Morning Post.
• “The slowdown in European investment is partly due to the growing realization that these investments are not as profitable or sustainable as initially hoped,” Zhang said.

The Greek port

• According to a Voice of American report, the port of Piraeus in Greece represents one of China’s most significant investments in Europe as part of the Belt and Road Initiative (BRI). COSCO, a state-owned Chinese shipping company, has acquired a majority stake of 67% in the port. Proponents of the deal argue that Chinese investment has revolutionized the port, leading to a remarkable five-fold surge in container volumes since 2009.
• On the other hand, detractors point out that China has not fulfilled its contractual commitments to invest $300 million in the port’s infrastructure. The agreed-upon investments were supposed to encompass the expansion of cruise ship facilities, the construction of new passenger terminals and hotels, the development of warehouses, and the modernization of the vehicle import terminal. Critics argue that China’s failure to meet these obligations raises concerns about the true benefits of the acquisition.

Geopolitical shifts

• The geopolitical landscape has also shifted, with increasing scrutiny over China’s strategic motives.
• Geopolitically, the BRI is viewed as a strategic tool for China to expand its sphere of influence and challenge the existing global order. By establishing a network of infrastructure projects and economic dependencies, China aims to reshape regional dynamics and undermine the dominance of traditional powers like the United States and its allies.
• The European Union (EU) is reassessing its dependence on foreign investments in critical infrastructure, pushing for greater strategic autonomy. This reassessment has led to heightened caution over engaging with BRI projects, which are often seen as instruments of China’s geopolitical leverage.

Debt-driven diplomacy

• Debt sustainability remains a significant concern, as several countries involved in the BRI have struggled with the debt incurred from large-scale infrastructure projects. These debt issues have led to accusations of ‘debt-trap diplomacy’ by China, further souring European perceptions. “Countries are finding themselves in challenging financial situations, and the fear of debt traps is making European investors think twice,” Zhang added.
• Another criticism leveled against the BRI is its lack of transparency and adherence to international standards. Many of the projects are shrouded in secrecy, with opaque financing arrangements and questionable environmental and social impact assessments. This opacity has raised concerns about corruption, exploitation of local communities, and disregard for human rights.
• Despite these challenges, China remains steadfast in its commitment to the BRI. Chinese officials continue to promote the initiative as a win-win for economic cooperation and development. A spokesperson for the Chinese foreign ministry said, “China is committed to working with all parties to address these challenges and ensure the initiative delivers mutual benefits.”
• The evolving situation suggests a critical juncture for the BRI. As the global economy seeks pathways to recovery from the pandemic and geopolitical tensions mount, the future engagement of European countries in the BRI remains under a cloud of uncertainty. The next few years will be crucial in determining whether the BRI can adapt to the changing global dynamics and restore confidence among its European partners.

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