Updated December 22, 2022
China’s “One Belt, One Road†Initiative: Economic Issues
The People’s Republic of China (PRC or China) in 2013
China’s Investment and Financing
launched an ambitious and multifaceted foreign economic
China has emerged as a top global investor and financier as
policy initiative—One Belt, One Road—to expand China’s
its companies have moved offshore to access raw materials,
global economic reach and influence. In 2015, China’s
commodities, and energy; acquire foreign capabilities; and
leaders changed the English name to the Belt and Road
build infrastructure. China’s overseas development finance
Initiative (BRI), possibly to deflect from the initiative’s
between 2008 and 2019 totaled an estimated $462 billion,
focus on developing China-centered and controlled global
rivaling $469 billion in World Bank lending over the same
ties in a hub and spoke format. The Communist Party of
period, according to Boston University’s Global
China (CPC) incorporated the initiative into the Party’s
Development Policy Center. China’s global outward
Charter in 2017 and reaffirmed its significance in the
foreign direct investment (FDI) stock reached an estimated
November 2022 Work Report of the CPC’s 20th Party
$2.6 trillion (6% of world total) in 2021 up from $34.7
Congress and in a January 2021 State Council White Paper.
billion (0.5% of world total) in 2001 while the United
Some in Congress assess that One Belt, One Road projects
States accounted for $9.8 trillion, or 23%, of global outward
advance China’s geopolitical and economic goals while
FDI stock in 2021 (down from 32% in 2001), according to
undercutting U.S. influence and challenging U.S. interests.
official country data compiled by the United Nations.
Scope and Objectives
China’s state banks (e.g., China Export-Import Bank and
One Belt, One Road aims to develop China-centered and -
China Development Bank), state firms, and government
controlled global infrastructure, transportation, trade, and
funds (e.g., the Silk Road Fund), undertake a large share of
production networks. While initially focused on Asia,
China’s overseas lending and investment. China’s payments
Europe, and Africa, the scope has become global and
may bypass the host country. The PRC government often
encompasses over 100 countries, including the United
pays its firms in China for projects they implement, while
States. It includes a land-based “Silk Road Economic Belt,â€
host governments pay the PRC government for the projects.
a “21st Century Maritime Silk Road,†and a “Digital Silk
These projects are neither assistance—China’s loans are
Road†that seeks to promote overseas China’s information
typically not interest-free and tend to be issued at, or near,
and communications technology (ICT) supply chain,
market terms—nor truly commercial, because repayments
including hardware, and optical cable and satellite
are often backed by collateral commitments (e.g., lease
networks, and newly revitalized “Health Silk Road.†The
rights, minerals, or commodities) made to the PRC
initiative also emphasizes economic policy coordination,
government, which in turn absorbs much of the commercial
trade and investment facilitation, dispute settlement,
risk for PRC firms. Recipients of collateral commitments
tourism, student and personnel exchanges, and cooperation
may include state firms designated by the PRC government
in research and development, standards, and media.
that were not party to the original transaction.
Figure 1. China’s Overseas Signed Contracts by Value
One Belt, One Road focuses on infrastructure, and related
supply chain, transportation, technology and financial
integration that expands the use of China’s credit
information system and currency. Projects in energy
(supply, generation, and transmission), ICT, manufacturing
(industrial parks and trade zones), and transportation (rail,
roads, ports, and airports) look to vertically integrate
China’s production supply chains, technology and service
infrastructure, and transportation networks. The initiative
seeks to expand China’s state firms’ presence overseas,
create new markets for China’s goods and services, and
secure access to foreign sources of agriculture, energy, and
strategic commodities required for China’s economic
development and policies. Projects also aim to develop
Source: CRS with data from China’s Ministry of Commerce.
China’s interior regions, employ PRC workers overseas,
and offload excess industrial capacity. China is focusing on
While China’s outward FDI flows peaked in 2016, its cross-
global collaboration in health, research, and standards
border contracts have been more stable (Figure 1). China’s
setting in response to the Coronavirus Disease (COVID-19)
use of onshore financing and special purpose investment
pandemic, a focus on basic research in the 14th Five-Year
vehicles complicates the ability to track activity. China’s
Plan (2021-2025), and implementation of the China
overseas lending slowed during the pandemic as China had
Standards 2035 strategy.
to restructure or extend loans for some countries, such as
Ecuador, Sri Lanka, and Zambia. China’s commitment to
fund its firms’ global expansion, however, has sustained
https://crsreports.congress.gov
China’s “One Belt, One Road†Initiative: Economic Issues
cross-border investment in agriculture, energy, minerals,
assess that some of China’s civilian infrastructure projects
finance, infrastructure, technology, and shipping.
also have military applications. Under its military-civil
China’s State Firms
fusion program and China Standards 2035 initiative, China
China’s strategic investments are typically state-sponsored
is developing standards that promote civilian and military
and aim to advance China’s economic and foreign policy
interoperability and could make foreign infrastructure such
goals. A handful of PRC state firms operate most projects.
as ports available for China’s military use. China Merchants
These firms are funded by and report directly to the central
Bank, for example, signed the initial commercial lease for
government, and include China Harbor, CRRC, State Grid,
property in Djibouti on which China developed a military
China Three Gorges, and COSCO. China’s projects also
base. Sam Enterprise Group, a firm reportedly tied to
China’s military,
strategically position national champions—such as Huawei,
bought land in Vanuatu and the Solomon
ZTE, and Alibaba—in part by establishing technology and
Islands. China’s projects offer alternatives to a range of
infrastructure platforms, architecture, and systems built to
U.S.-led networks and standards. PRC digital platforms
China’s standards. Alibaba’s internet project in Malaysia,
could support China’s digital currency. China’s overland
for example, provides a foundation on which China offers
rail and Beidou satellite networks offer substitutes to U.S-
data/cloud, e-commerce, and financial services. Projects
controlled sea lanes and GPS navigation technology.
appear to seek interconnection and interoperability in
Trade Principle of Reciprocity
transportation (e.g., rail gauges), energy (e.g., power grid),
and communications (e.g., 5G), allowing China potential
Reciprocity is a core principle of the global rules-based trading
control of sensitive infrastructure and related services.
system in which countries extend commensurate market
Projects in cobalt, lithium, and nickel support China’s
access terms. PRC entities are expanding overseas in many
battery and electric vehicle industrial policies.
sectors that the PRC government restricts to foreign
investors (e.g., construction, engineering, transportation,
U.S. Concerns
communications, and finance). China’s government does not
Some observers note the economic benefits of China’s
offer reciprocal market access for the rights it secures in
investments in developing countries while others note that
other countries. The PRC government instead creates
China is introducing unsustainable debt obligations and
openings in foreign markets through its offers of deal-ready
opportunities to gain concessions. China tends to extend the
state financing and integrated project delivery, which can be
duration of its loans, rather than forgive debt repayment,
attractive to governments seeking to fast track project
which creates long-term financial dependencies. In 2017,
approvals. Projects may facilitate economic activity and trade,
when the Sri Lankan government was unable to repay PRC
but on China’s terms and through supply chains it controls.
loans, China Merchants Port Holdings Company, Ltd.
acquired a majority stake in the firm that operates Sri
Lanka’s
U.S. Response
Hambantota port and the right to operate the port
for 99 years. Credit and loan terms are generally opaque
Congress enacted the Better Utilization of Investments
Leading to Development Act of 2018 (BUILD Act, P.L.
and China tends to settle agreements bilaterally. China’s
opacity in lending came to a head in 2019 when the U.S.
115-254) to create the U.S. International Development
government questioned whether International Monetary
Finance Corporation (DFC) and increase support for quality
market-oriented and financially-sustainable infrastructure
Fund relief for Pakistan might also repay China. The PRC
government insists that its state banks and state firms are
projects that have environmental and social safeguards. In
not subject to sovereign lending terms adopted by the
2021, the DFC said it would support projects that refinance
Ecuador’s debt to China if it excluded PRC firms in its 5G
United States and other major creditors in the Paris Club.
PRC loans often forbid multilateral debt restructuring (e.g.,
networks, but the deal is reportedly at an impasse. The U.S.
under Paris Club auspices). China joined the two G20 debt
government has promoted alternatives to China through a
G-7 Partnership for Global Infrastructure and a Blue Dot
relief initiatives that accept Paris Club disciplines, but these
apply only to China Export-Import Bank and China
Network prototype for quality infrastructure financing in
International Development Cooperation Agency. The PRC
development with Australia, Japan, and the Organization
for Economic Co-operation and Development. The U.S.
government claims it has provided more deferments under
G20 schemes than Paris Club members, but many countries
government has sanctioned some PRC state firms that build
indebted to China have not applied—or do not appear to
One Belt, One Road military infrastructure in the South
qualify—for G20 relief terms, likely due to PRC pressure.
China Sea. Congress might also examine
 PRC entities’
Some experts are concerned that One Belt, One Road
presence in U.S. production, energy,
undermines the role and principles of multilateral
transportation, and communications networks and
investments in the Western Hemisphere and Caribbean;
institutions, which collaborate with China on some of its
ï‚·
projects. This collaboration may set better terms for host
whether new trade rules or organizations are needed to
countries—including procurement practices that allow non-
influence the networks PRC entities are developing; and
ï‚· whether new standards, investment, or procurement
PRC firms—while also advancing China’s goals. Some
experts say that China is undercutting the operations and
rules ought to discipline certain investment behavior.
principles of global financial institutions and subsequently
Karen M. Sutter, Specialist in Asian Trade and Finance
should not have leadership positions in these organizations.
Andres B. Schwarzenberg, Analyst in International Trade
China’s investments in strategic sectors and infrastructure
and Finance
have prompted governments in the United States, Australia,
Michael D. Sutherland, Analyst in International Trade and
Canada, Europe, India, and Japan, among others, to
Finance
increase scrutiny of these deals. Some defense analysts
https://crsreports.congress.gov
China’s “One Belt, One Road†Initiative: Economic Issues
IF11735
Disclaimer
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan shared staff to
congressional committees and Members of Congress. It operates solely at the behest of and under the direction of Congress.
Information in a CRS Report should not be relied upon for purposes other than public understanding of information that has
been provided by CRS to Members of Congress in connection with CRS’s institutional role. CRS Reports, as a work of the
United States Government, are not subject to copyright protection in the United States. Any CRS Report may be
reproduced and distributed in its entirety without permission from CRS. However, as a CRS Report may include
copyrighted images or material from a third party, you may need to obtain the permission of the copyright holder if you
wish to copy or otherwise use copyrighted material.
https://crsreports.congress.gov | IF11735 · VERSION 3 · UPDATED