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China’s BRI spend down 54% in 2020 but ‘green’ funding up

The coronavirus pandemic and its vice-like grip on global markets also impacted China’s flagship Belt and Road Initiative (BRI) in 2020, as official government statistics revealed a 54 percent reduction in overseas investment in BRI countries.

Non-BRI-aligned nations fared even worse, with investment in countries not signed up to the global trade and infrastructure initiative dropping by 70 percent in a single year.

The financial data was released by the Chinese finance ministry and relates to investments between January and November, 2020, according to the report, ‘China Belt and Road Initiative (BRI) Investment Report 2020,’ published by the IIGF Green Belt and Road Initiative Center of the International Institute of Green Finance (IIGF) at the Central University of Finance and Economics (CUFE) in Beijing.

“Data for Chinese investments in the 138 countries of the Belt and Road Initiative show that overall investments in the BRI in 2020 were about $47 billion. This is equal to a decline of 54 percent to investments in 2019 and about $78 billion less than in the peak year of BRI investments, in 2015. Possibly due to the COVID-19 pandemic, BRI investments slowed to levels not seen since the global trade policy was founded in 2013,” the report said.

Renewable energy investments topped the table of overseas energy investments for the first time, raking in 57 percent of investments in the sector, while some BRI-aligned countries, like Vietnam, saw an increase in investment, signalling a more targeted investment approach from Beijing on BRI spending.

Renewable energy investments (solar, wind, hydro) now constitute the majority of Chinese overseas energy investments – increasing their share from 38 percent in 2019 to 57 percent in 2020 – despite the total decrease in BRI investments.

Dip in Chinese overseas investments

Chinese overseas investments into countries of the BRI were about $47 billion in 2020, about 54 percent less than in 2019, according to the report. Chinese investments in non-BRI countries dropped by 70 percent compared to 2019 to about $17 billion in 2020.

BRI investments slowed in all sectors, except logistics, and state-owned enterprises remained the dominant funding partners for investments – with only Jack Ma’s Alibaba featuring as a major private investment partner in 2020.

Report author Dr Christoph Nedopil Wang, who wears the twin hats of Founding Director, the Green Belt and Road Initiative Centre and Senior Research Fellow, International Institute of Green Finance (IIGF) of the Central University of Finance and Economics (CUFE), Beijing, said in 2021, Chinese BRI investments are expected to focus on strategic assets, e.g. ports, as well as regional transport infrastructure investments in Asian countries to utilise the new trade agreement under a recently signed RCEP (Regional Comprehensive Economic Partnership (RCEP) between Asia-Pacific nations, set to form the world’s largest trading block).

“For 2021, we see less demand for Chinese overseas energy investments due to declining GDPs and thus declining electricity demand. We see opportunities in investing in more bankable 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.”

Asia continued to receive the largest share of Chinese BRI investments (about 54 percent in 2020), while Africa received about 27 percent of BRI investments. Investments into European BRI countries declined by 36 percent while African regions (Sub-Saharan Africa, Arab and Middle East) were most heavily impacted and declined by 69 percent and 66 percent respectively between 2019 and 2020.

The countries that received most investments were Vietnam, Indonesia, Pakistan and Chile. Vietnam investment increased by over 200 percent compared to 2019. Other BRI countries that saw increases in Chinese investments despite the COVID-19 pandemic included Poland, Bulgaria, Serbia, Zimbabwe, Zambia and Chile, as well as Thailand, according to report authors.

In 2020, the majority of energy investments went into hydropower (35 percent), followed by coal (27 percent) and solar (23 percent). In 2017, only 35 percent of BRI investments went to hydro, solar and wind projects but in 2020, 56 percent of BRI investments went into these sectors, a strong relative increase. Within the renewable energy sector, solar, wind and hydro all increased their relative share of the total energy investments.

Coal investments have steadily declined from their peak in 2015. At the same time, however, coal investments have seen a relative resurgence in 2020, moving from 15 percent of coal-related investments in 2018 to 27 percent in 2020.

On 31 December 2020, the Chinese Ministry of Commerce (MOFCOM) released its investment data for ‘China’s investments with countries along the Belt and Road’ covering the period January to November 2020. According to the stats, Chinese enterprises invested RMB 110.7 billion (about $17 billion) in non-financial direct investments in countries “along the Belt and Road.”

“With continued lock-downs and issues of debt, we do not see a fast recovery of overseas investments in 2021. Rather, we see specific strategic investments (such as in ports) going ahead, while road and energy investments will focus on countries in Asia,” the report concluded.
Source: Reuters (Reporting by Charles Lavery; Editing by Anoop Menon)

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