Has Belt and Road become a political liability for China?

September 23, 2019

HONG KONG - Since China's President, Xi Jinping, announced the Belt and Road Initiative (BRI) in late 2013, China has invested generously in enhancing connectivity among neighbouring countries. But Xi's grand plan for China's global expansion has elicited strong reaction from the rest of the world, says Nataxis in a research note.

"In fact, the BRI has gradually evolved in terms of its objectives: from its initial economic focus related to trade connectivity -- and a way for China to export its excess capacity -- to much more of a soft-power tool," the note says.

"Many of BRI's infrastructure projects now appear to be strategic rather than economic in nature, which is strongly associated with the increasingly-negative

view of BRI.

"Our recent analysis confirmed that sentiment toward the Belt and Road isvery different across countries and that it has worsened over time.

"The reasons behind are multi-fold:

"First, countries appear increasingly wary of excessive dependence on Chinese imports and an imbalanced trade pattern.

"Secondly, a number of salient issues closely related to investment has stirred up worries, such as debt dynamics for recipient countries and environmental issues.

"More generally, too. many objectives have piled up under the guise of the BRI which could, sometimes, turn out to be contradictory."

The Nataxis report says that, while painful, it is not a completely negative outcome for China, as the current

setback is pushing China to explore a more sustainable approach to acquire soft power. Given the diminishing returns on investment at home,

"China needs to expand in overseas markets without excluding other investors.

"Against this backdrop, the next path for China's Belt and Road will probably be more flexible and inclusive." www.nataxis.com (ATI).