As China’s Belt and Road Initiative (BRI) enters its second decade, the scope, strategy, and global competition surrounding this colossal project are evolving rapidly. The 2023 BRI Investment Report from the Green Finance & Development Center, along with recent analyses, provide a comprehensive look into how China is recalibrating its approach in response to a shifting global landscape. While the BRI has long been seen as a massive infrastructure project, recent developments reveal a much more complex and nuanced strategy.
Middle East: A Competitive Battleground
The Middle East has historically been a cornerstone of the BRI due to its strategic location and rich energy resources. In 2018, President Xi Jinping announced a $20 billion “oil and gas, plus” economic package under the BRI, focusing on integrating China into the Middle East’s economic framework, particularly through the Gulf Cooperation Council (GCC) countries. Over the past decade, China has emerged as the MENA region’s largest trading partner, surpassing the United States in nearly every nation except Jordan and Bahrain. This deep integration has been marked by significant bilateral cooperation agreements, leading to a surge in Chinese business, technology, investment, and trade across the region.
However, the BRI’s promise in the Middle East has faced several challenges. Initially, MENA governments had high expectations that China would play a larger role as the U.S. appeared to reduce its regional presence. Over time, these expectations have waned. BRI funds have dried up, and concerns have arisen regarding labor practices, particularly in low- and middle-income countries where BRI projects have failed to meet expectations for local participation and economic development. The pandemic further restrained China’s outbound investments, leading to a more cautious and selective approach.
In recent years, China’s BRI has encountered new competition following the announcement of the U.S.-led G7 Global Partnership for Infrastructure and Investment (GPII), which commits $600 billion to global strategic infrastructure projects, including those in the Middle East. President Biden’s July 2023 trip to Saudi Arabia secured $3 billion in financial commitments from GCC countries for the G7 initiative. While this sum is modest compared to China’s vast investments, it signals that the G7 intends to compete with the BRI in this critical region.
China has responded by shifting its focus within the MENA region, particularly toward the GCC markets. This recalibration targets areas where potential returns are higher, and risks are lower. Beijing is directing its investments toward energy security, technology, green industrialization, and alternative energy, particularly in the Gulf. These investments align with GCC countries’ economic diversification policies, which aim to reduce their dependence on oil revenues.
One significant change in China’s BRI approach is its openness to non-Chinese financing through joint ventures and partnerships, especially in sectors like public health and technology. This strategy allows China to expand economic opportunities with key partners while reducing its financial exposure in more volatile areas of the region. However, the GCC market is more competitive for Chinese companies compared to the rest of the MENA region. GCC governments, under their national development strategies like Saudi Arabia’s Vision 2030, are increasingly regulating the business environment to ensure that foreign companies contribute to local development.
The 2023 report highlights that while China remains deeply invested in the region, the landscape is becoming increasingly competitive. Total Chinese engagement in the Middle East decreased from $12.3 billion in the first half of 2022 to $8.1 billion in the same period in 2023. This decline is coupled with a targeted increase in specific projects, particularly in Saudi Arabia, where construction investments surged to $5.6 billion. This strategic recalibration suggests that China is doubling down on high-impact projects that align with its long-term interests, even as it scales back on broader, less strategic engagements.
Africa: The New Frontier for BRI
As China recalibrates its focus in the Middle East, Africa has emerged as the new frontier for BRI investments. In 2023, Africa overtook the Middle East as the largest recipient of BRI investments, receiving $21.7 billion in total. This shift is driven by Africa’s wealth of natural resources, particularly critical minerals like cobalt and lithium, which are essential for the production of electric vehicles and renewable energy technologies.
This focus on critical minerals is not just about resource extraction; it’s about securing supply chains for the future. As the demand for these resources continues to surge, China is positioning itself as the dominant player in Africa, a continent that holds significant reserves of these essential materials. The upcoming Forum on China-Africa Cooperation (FOCAC) is expected to further solidify these ties, with discussions likely centering on critical resources and the future of China-Africa relations.
Yixin Yu’s recent paper underscores how China’s engagement in Africa’s critical minerals sector is reshaping global supply chains. Yu emphasizes that China’s strategy goes beyond mere resource extraction; it includes substantial investments in local infrastructure and capacity-building, aiming to forge long-term partnerships with African nations. These relationships will be crucial as China seeks to maintain its influence over global critical mineral supplies and secure its position in the green economy.
China’s investments in African infrastructure—especially in transportation and energy—are about more than just economic development. They’re about securing the supply chains that will drive the next generation of global industry. By establishing a strong foothold in Africa, China is ensuring that it remains at the center of these critical industries for decades to come.
Strategic Shifts and Global Competition
The strategic shifts in China’s BRI are not limited to specific regions but extend to the very structure of its investments. The 2023 report highlights a growing trend toward equity-based investments, a significant departure from the debt-heavy approach that characterized the early years of the BRI. This shift reflects China’s awareness of the risks associated with debt-financed projects, particularly in politically unstable regions.
Equity-based investments involve more risk but offer greater control. In sectors like mining and technology, where the stakes are high, this approach allows China to secure a direct influence over the management and direction of critical projects. By moving toward equity investments, China is spreading financial risk and addressing concerns about “debt-trap diplomacy,” a criticism that has plagued the BRI in recent years.
This shift is particularly relevant in regions like Pakistan, Turkey, and Kenya, where geopolitical risks and economic instability have led to a significant decline in Chinese engagement. For example, Pakistan’s involvement in the China-Pakistan Economic Corridor (CPEC) has dropped by 74%, signaling that China is reassessing its risk exposure in these regions. By adopting a more flexible investment strategy, China is better positioned to manage these risks.
Challenges and Opportunities for the U.S.
China’s deepening engagement in Africa and its focus on critical minerals present significant challenges for the United States and its allies. As China secures long-term access to key resources essential for the global green economy, the U.S. risks being sidelined in the race for these vital materials. The recent launch of the India-Middle East-Europe Economic Corridor (IMEC) is a strategic response to China’s influence, offering a viable alternative to the BRI, particularly in the GCC and broader MENA region.
The IMEC, signed by the U.S., Saudi Arabia, Germany, France, Italy, and the UAE in September 2023, aims to foster economic growth by improving connectivity and integration among Asia, the Arabian Gulf, and Europe through a new corridor that includes railway networks, digital connectivity, and clean hydrogen export infrastructure. This initiative represents a significant move to counter China’s influence and offers a tangible alternative to the BRI.
However, competing with China’s well-established presence in Africa and the MENA region will require a multi-faceted approach from the U.S. This includes increasing investments in critical mineral supply chains, developing stronger partnerships with African nations, and working through multilateral institutions to promote transparency and sustainability in global infrastructure projects. The U.S. must also leverage its alliances in the G7 and other forums to propose infrastructure initiatives that emphasize good governance, environmental sustainability, and equitable growth.
The Road Ahead
China is strategically evolving and adapting its approach to meet the challenges of a rapidly changing global landscape. While the BRI remains a cornerstone of China’s global ambitions, its focus is shifting toward more targeted investments in regions like the GCC and Africa, where the potential returns are higher and the risks are more manageable.
As we depart from the Forum on China-Africa Cooperation (FOCAC) and witness the growing competition between China and the U.S. in the MENA region, the stakes around supply chains, investment, and development are higher than ever. China’s ability to secure critical resources, build long-term partnerships, and navigate the complexities of global competition will determine the future trajectory of the BRI and its impact on the global economy.
For the United States and its allies, Beijing’s challenge is clear. To effectively compete, the West will need compelling alternatives to China’s BRI that emphasize sustainability, transparency, and long-term benefits for partner nations. The race is on.
Endnotes
Green Finance & Development Center, BRI Investment Report 2023
https://greenfdc.org/china-belt-and-road-initiative-bri-investment-report-2023/
Yixin Yu, "Africa, China, and the Race for Critical Minerals" – The Diplomat, August 2024
https://thediplomat.com/2024/08/africa-china-and-the-race-for-critical-minerals-a-new-focus-for-focac/
G7 Global Partnership for Infrastructure and Investment (GPII)
https://www.whitehouse.gov/briefing-room/statements-releases/2022/06/26/fact-sheet-president-biden-and-g7-leaders-formally-launch-the-partnership-for-global-infrastructure-and-investment/
India-Middle East-Europe Economic Corridor (IMEC)
https://www.whitehouse.gov/briefing-room/statements-releases/2023/09/09/fact-sheet-the-india-middle-east-europe-economic-corridor/
Saudi Vision 2030
https://www.vision2030.gov.sa/en
BRI’s Geopolitical Challenges – Foreign Affairs
https://www.foreignaffairs.com/articles/china/2023-05-10/belt-and-road-initiative-under-pressure
Forum on China-Africa Cooperation (FOCAC)
https://www.focac.org/