China’s “One Belt, One Road” Initiative: Economic Issues




Updated September 27, 2023
China’s “One Belt, One Road” Initiative: Economic Issues
The People’s Republic of China (PRC or China) in 2013
build infrastructure. China’s overseas development finance
launched an ambitious and multifaceted foreign economic
between 2008 and 2021 totaled an estimated $498 billion,
policy initiative—One Belt, One Road—to expand China’s
rivaling $601 billion in World Bank lending over the same
global economic reach and influence. In 2015, China’s
period, according to Boston University’s Global
leaders changed the English name to the Belt and Road
Development Policy Center. China’s global outward
Initiative (BRI), possibly to deflect from the initiative’s
foreign direct investment (FDI) stock stood at $2.9 trillion
focus on developing China-centered and controlled global
(7.4% of world total) in 2022, up from $34.7 billion (0.5%
ties in a hub and spoke format. The Communist Party of
of world total) in 2001, while the United States accounted
China (CPC) incorporated the initiative into the Party’s
for $8.0 trillion, or 20.2% of global outward FDI stock in
Charter in 2017 and reaffirmed its significance in the
2022 (down from 32% in 2001), according to official
November 2022 Work Report of the CPC’s 20th Party
country data compiled by the United Nations.
Congress and in a January 2021 State Council White Paper.
China’s state banks (e.g., China Export-Import Bank and
Some in Congress assess that One Belt, One Road projects
China Development Bank), state firms, and government
advance China’s geopolitical and economic goals while
funds (e.g., the Silk Road Fund), undertake a large share of
undercutting U.S. influence and challenging U.S. interests.
China’s overseas lending and investment. China’s payments
Scope and Objectives
may bypass the host country. The PRC government often
One Belt, One Road aims to develop China-centered and -
pays its firms in China for projects they implement, while
controlled global infrastructure, transportation, trade, and
host governments pay the PRC government for the projects.
production networks. While initially focused on Asia,
These projects are neither assistance—China’s loans are
Europe, and Africa, the scope has become global and
typically not interest-free and tend to be issued at, or near,
encompasses over 100 countries, including the United
market terms—nor truly commercial, because repayments
States. It includes a land-based “Silk Road Economic Belt,”
are often backed by collateral commitments (e.g., lease
a “21st Century Maritime Silk Road,” and a “Digital Silk
rights, minerals, or commodities) made to the PRC
Road” that seeks to promote overseas China’s information
government, which in turn absorbs much of the commercial
and communications technology (ICT) supply chain,
risk for PRC firms. Recipients of collateral commitments
including hardware, and optical cable and satellite
may include state firms designated by the PRC government
networks, and newly revitalized “Health Silk Road.” The
that were not party to the original transaction.
initiative also emphasizes economic policy coordination,
Figure 1. China’s Overseas Signed Contracts by Value
trade and investment facilitation, dispute settlement,
tourism, student and personnel exchanges, and cooperation
in research and development, standards, and media.
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
Source: CRS with data from China’s Ministry of Commerce.
strategic commodities required for China’s economic
While China’s outward FDI flows peaked in 2016, its cross-
development and policies. Projects also aim to develop
border contracts have been more stable (Figure 1). China’s
China’s interior regions, employ PRC workers overseas,
use of onshore financing and special purpose investment
and offload excess industrial capacity. China is focusing on
vehicles complicates the ability to track activity. China’s
global collaboration in health, research, and standards
overseas lending slowed during the pandemic as China had
setting in response to the COVID-19 pandemic, a focus on
to restructure or extend loans for some countries, such as
basic research in the 14th Five-Year Plan (2021-2025), and
Ecuador, Sri Lanka, and Zambia. China’s commitment to
implementation of the China Standards 2035 strategy.
fund its firms’ global expansion, however, has sustained
China’s Investment and Financing
cross-border investment in agriculture, energy, minerals,
China has emerged as a top global investor and financier as
finance, infrastructure, technology, and shipping.
its companies have moved offshore to access raw materials,
commodities, and energy; acquire foreign capabilities; and
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China’s “One Belt, One Road” Initiative: Economic Issues
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
strategically position national champions—such as Huawei,
China’s military, 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
transportation (e.g., rail gauges), energy (e.g., power grid),
Trade Principle of Reciprocity
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
U.S. Concerns
investors (e.g., construction, engineering, transportation,
Some observers note the economic benefits of China’s
communications, and finance). China’s government does not
investments in developing countries while others note that
offer reciprocal market access for the rights it secures in
China is introducing unsustainable debt obligations and
other countries. The PRC government instead creates
opportunities to gain concessions. China tends to extend the
openings in foreign markets through its offers of deal-ready
duration of its loans, rather than forgive debt repayment,
state financing and integrated project delivery, which can be
which creates long-term financial dependencies. In 2017,
attractive to governments seeking to fast track project
when the Sri Lankan government was unable to repay PRC
approvals. Projects may facilitate economic activity and trade,
loans, China Merchants Port Holdings Company, Ltd.
but on China’s terms and through supply chains it controls.
acquired a majority stake in the firm that operates Sri
Lanka’s Hambantota port and the right to operate the port
U.S. Response
for 99 years. Credit and loan terms are generally opaque
Congress enacted the Better Utilization of Investments
and China tends to settle agreements bilaterally. China’s
Leading to Development Act of 2018 (BUILD Act, P.L.
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
Fund relief for Pakistan might also repay China. The PRC
market-oriented and financially-sustainable infrastructure
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
United States and other major creditors in the Paris Club.
Ecuador’s debt to China if it excluded PRC firms in its 5G
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
relief initiatives that accept Paris Club disciplines, but these
G-7 Partnership for Global Infrastructure and a Blue Dot
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
government claims it has provided more deferments under
for Economic Co-operation and Development. The U.S.
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
Some experts are concerned that One Belt, One Road
• PRC entities’ presence in U.S. production, energy,
undermines the role and principles of multilateral
transportation, and communications networks and
institutions, which collaborate with China on some of its
investments in the Western Hemisphere and Caribbean;
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
PRC firms—while also advancing China’s goals. Some
• whether new standards, investment, or procurement
experts say that China is undercutting the operations and
rules ought to discipline certain investment behavior.
principles of global financial institutions and subsequently
should not have leadership positions in these organizations.
Karen M. Sutter, Specialist in Asian Trade and Finance
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
assess that some of China’s civilian infrastructure projects
IF11735
also have military applications. Under its military-civil
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China’s “One Belt, One Road” Initiative: Economic Issues


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https://crsreports.congress.gov | IF11735 · VERSION 4 · UPDATED