China’s Belt and Road Initiative (BRI) took the developing world by storm and its rivals by surprise. In just a decade, Xi Jinping’s flagship foreign policy initiative expanded to 150 countries and surpassed 1 trillion dollars in cumulative engagement. Originally conceived as a means to export China’s domestic overcapacity in construction, the BRI has since evolved into a sprawling network of infrastructure projects, trade agreements, and financial partnerships. The initiative has successfully strengthened China’s global influence and positioned it as a formidable economic and diplomatic power. Today, China is no longer just an emerging power; it is regarded as a “near-peer soft power competitor” with the US. However, as the BRI enters its second decade, China’s approach is undergoing a major transformation. Faced with domestic economic challenges, Beijing is recalibrating its strategy, but this will only highlight deeper structural flaws within the initiative. Corruption scandals, project failures, and the growing cost of restructuring loans for partner nations have damaged Beijing’s reputation and placed an unsustainable burden on China’s already strained finances. Whilst Beijing remains committed to the BRI, its execution has shifted, creating opportunities for some nations but leaving others behind.
This article examines how China is reshaping the BRI in response to domestic economic challenges. It will also assess China’s evolving role as a development partner, highlighting how its economic priorities impact its overseas commitments. The flexibility of China’s financial commitment has long been an advantage, allowing it to swiftly withdraw from unfeasible projects and redirect resources to more strategic priorities. However, the essence of the “China first” policy means that Beijing often abandons projects that no longer serve its immediate needs or strategic interests. Cases such as China’s questionable commitment to Cambodia’s Funan Techo Canal and the cancellation of three megaprojects in the Philippines create uncertainty around China’s commitment to long-term projects. Meanwhile, China’s retreat from certain ventures is an opportunity for China’s rivals. The West, Japan, South Korea, and India could all expand their global influence by stepping in where China has pulled back. By offering more transparent, sustainable, and financially viable infrastructure investments, these countries can position their global infrastructure development programmes as more credible alternatives to the BRI. Developing states also stand to benefit from a shift of the status quo. With a wider range of infrastructure development partners to choose from, they could select investors that best meet their specific needs whilst reducing the risk of overdependence on any single partner. As the global development landscape shifts, the key question is no longer just whether China will follow through on its promises but whether other nations are ready to seize the opportunity left in its wake.
China’s domestic economic problems and how they affect the BRI
For developing countries, the BRI provides the opportunity to build large infrastructure projects that are critical for economic development. Most recipient countries do not have the capacity, technical expertise, or financial might to develop their infrastructure at scale domestically. Partnering with China allows them to overcome these obstacles and move forward with essential projects at a far greater rate. Furthermore, if a state is unwilling or unable to take on extra debt, China offers a range of flexible financing options that mean projects can still go ahead. In addition to conventional loans, recipient countries can utilise models such as Build-Operate-Transfer (BOT) agreements. With BOTs, a Chinese state-owned enterprise (SOE) handles the financing and construction in return for a lease on the final product for a set period. Other options include resource-based financing, in which countries grant China rights to natural resources in exchange for the development of extraction capabilities. Flexible financing options combined with China’s huge construction capacity have transformed China into the go-to partner for infrastructure development in the Global South. In contrast, loans from Western states and multilateral organisations tend to be too few in number, come with too many conditions attached, or focus on smaller-scale development projects. But beyond infrastructure, the BRI offers partner states the chance to be part of something larger - a growing network of trade and connectivity that can drive regional and global economic integration. Whilst most projects face at least some level of controversy, there are many success stories, from the Belgrade-Budapest Railway in Europe to the Lekki Deepwater Port in Nigeria.
But golden opportunities rarely last forever. Beijing follows a “China-first” foreign policy, which prioritises domestic stability over external commitments. Amid recent economic challenges, China has become increasingly focused on its internal problems, leading to policy shifts, project withdrawals, and the redistribution of resources away from the BRI. These changes began in the aftermath of the COVID-19 pandemic. China’s strict zero-COVID policy dealt a severe blow to the economy, and recovery has been sluggish ever since. The crisis in China’s real estate sector has only worsened the situation. Once a key driver of economic growth, the housing market accounted for a staggering 29% of GDP at its peak. However, the bubble burst in 2020, causing property values to plummet, placing immense strain on developers and shaking consumer confidence. With 60–70% of household wealth tied up in real estate, domestic demand collapsed and has struggled to recover since. Adding to these challenges is an impending demographic crisis. In 2023, China’s population decreased for the second year in a row. Even with the scrapping of China’s One Child Policy, the fertility rate remains at only 1.175 births per woman (2022). Whilst China’s economic rise was tied to its young and increasing labour force, an ageing and shrinking population threatens long-term growth by reducing the workforce, increasing dependency ratios, straining social welfare systems, and weakening domestic demand — all of which could undermine China’s economic stability and global competitiveness.
Fiscal pressures are mounting on the CCP, with the budget deficit set to reach a record peak of 4% of GDP in 2025. Meanwhile, growth has been sluggish by Chinese standards. The Chinese economy grew by 5% in 2024, down 0.2% from 2023 and directly on the government’s target. This rate of growth may seem impressive on paper, but it is low by Chinese standards. To put things into perspective, between 2000 and 2021, Chinese growth never dipped below 6% of GDP. There is no easy fix for China’s domestic economic situation. A successful plan for the future will require careful long-term planning, innovative policies and a wise allocation of state resources.
As China grapples with its domestic economy, the role of the BRI has become increasingly complex. Originally launched to expand China’s global influence and secure new trade partners, the initiative also served as an economic pressure valve, stimulating demand for Chinese exports, providing work for state-owned enterprises, and opening new markets for investment. However, sustaining these large-scale infrastructure projects has become increasingly difficult to justify financially. Beijing now faces a tough choice: continue funding overseas ventures at the current rate or focus on stabilising its domestic economy.
It is important to note that the BRI has successfully injected capital into China’s economy. However, the 6% year-over-year export growth in Q3 2024 has only partially offset weak domestic demand, which Deloitte doubts can serve as a viable long-term alternative. Despite its economic and strategic benefits, the BRI has also caused Beijing many headaches. A 2021 study found that a staggering 35% of BRI infrastructure projects were affected by controversies ranging from corruption to labour exploitation. Perhaps most infamously, the 1MDB Scandal led to the electoral defeat and imprisonment of Malaysian Prime Minister Najib Razak. He was implicated in a vast corruption scandal involving the embezzlement of billions from Malaysia's state development fund. The Wall Street Journal reported in 2019 that Chinese officials agreed to help bail out Malaysia's state development fund 1Malaysia Berhad, known as 1MDB, by inflating the cost of infrastructure projects. The investigation is ongoing. Similarly, the controversial Cocoa Codo Sinclair Dam in Ecuador is a focal point of BRI corruption in Latin America. Soft power is inevitably tied to a state's reputation. When a country’s flagship foreign policy initiative becomes synonymous with corruption, its global standing suffers. Moreover, corruption ensures that funds intended for development often flow into the wrong coffers, undermining both cost-effectiveness and trust in Chinese-led projects.
Perhaps more concerning is China’s lending practices, not just for recipient states but for Beijing itself. Foreign Policy reported in 2022 that 60% of China’s overseas loans went to financially distressed countries, compared with just 5% in 2010. In its effort to expand the BRI to as many developing nations as possible, China took on significant risk, and many of these countries now struggle to repay their loans. In 2022, China announced that it would forgive 23 interest-free loans to 17 African countries, offering $10 billion of China’s IMF reserves to the continent. Between 2020 and 2021, Chinese institutions were forced to restructure $52 billion worth of loans, amounting to an “overseas debt crisis”. Whilst debt relief contradicts the narrative of “debt trap diplomacy”, it ultimately exemplifies poor lending practices. The financial burden of debt forgiveness and restructuring largely falls on Beijing. Given China’s domestic economic challenges, this model of lending is increasingly unsustainable.
China’s domestic economic challenges, combined with BRI controversies, have pushed Beijing to recalibrate its global development strategy. In 2021, at the third symposium on the construction of the “Belt and Road” in Beijing’s Great Hall of the People, Xi Jinping announced the Global Development Initiative. The GDI called for a shift away from projects in “dangerous and turmoiled places” and towards “small and beautiful” projects. The announcement correlated with a dramatic decrease in BRI lending, which decreased from a peak of $125.6 billion per year in 2016 to just $61 billion in 2019. Some viewed the GDI as an effort to gradually eclipse the BRI with a more cautious and pragmatic development strategy amidst the COVID-19 pandemic. Despite speculation that China is scaling back the BRI, Beijing’s actions came as a surprise. In September 2024, Xi committed another $51 billion in credits and aid to its African partners for the next three years, promising to step up the number of infrastructure projects to employ a million more workers. In fact, BRI spending recovered to around 92.4 billion USD, spread across 212 deals in 2023. Not quite at pre-pandemic levels that hovered around 100 billion USD annually, but a significant recovery nonetheless. [It is important to note that these two sources must use different metrics. Greenfdc estimates BRI total spending at 92.4 billion USD for 2023 but 74.5 billion in 2022, a 17.9% increase. Yet Statista puts spending at 67.8 billion in 2022 with no data for 2023]. This resurgence underscores China's continued emphasis on the initiative, even as it diverts resources for pressing domestic needs.
Despite a resurgence in spending, Beijing has adopted a more cautious approach to ensure the long-term sustainability of the BRI. The focus has shifted towards reducing financial risk and improving the initiative’s overall viability. Chinese banks face limits on external lending that have significantly reduced the size of loan deals, which by 2023 were nearly 50 per cent smaller than they were five years ago. Similarly, the target of spending has shifted from construction to investment. In this context, investment refers to China or Chinese firms taking an equity stake in a project or company under the BRI initiative rather than securing contracts to build the infrastructure themselves. By 2023, investments accounted for approximately 52% of BRI engagements, compared to just 29% in 2021. Additionally, the average deal size for construction projects has dropped to $394 million in 2023, the second-lowest since the initiative began. Whilst investment reduces China’s direct control over projects, it allows continued involvement whilst mitigating financial and reputational risks if a project fails or exceeds its budget. More importantly, shifting from loans to equity investments shields China from the financial strain of debt forgiveness or restructuring, making its overseas development strategy more sustainable in the long run.
Instead of acting solely as a creditor, China has repositioned itself as an investor in half of its new BRI projects. However, policy changes extend beyond spending strategies to the “Clean Silk Road” launched in 2020. As its name suggests, this initiative aims to address the controversy, corruption, and criticism surrounding the BRI. The most significant aspect of this effort is the implementation of anti-corruption and transparency measures, yet as evidenced in Ecuador, progress remains limited. By October 2023, the UN Office on Drugs and Crime was still stressing the urgent need for stronger protections against corruption within the BRI. One aspect of the “Clean Silk Road” presents an exciting opportunity for companies and states alike. It involves what China calls the “New Three”: electric vehicles, batteries, and renewable energy. China has positioned itself as a global leader in each of these industries and has built the vital supply chains to fuel these green industries. Just take a look at this article from one of our analysts. Global green energy projects are a priority, reflecting China’s ambition to improve its global image and position itself as a leader in the fight against climate change. This creates an opportunity for states that are looking to modernise or diversify their energy sectors.
China is not defunding the Belt and Road Initiative but is instead recalibrating its strategy to focus on less risky projects with a greater likelihood of success. Beijing wants sustainable projects with countries that have stronger repayment capacities. This strategic shift will carry significant implications for partner states and the future of the BRI. Whilst some nations may benefit from this more selective approach, many others will find themselves sidelined.
BRI Withdrawals: The Funan Techo Canal, the Philippines and Ecuador
Before deciding how to navigate Beijing’s new BRI strategy, it is important to understand another element of Chinese infrastructure projects - commitment and delivery. China’s direct control over its SOEs enables it to remain flexible in its commitments, swiftly reallocating resources in response to shifting domestic needs and policy priorities. This flexibility offers several advantages. It allows Beijing to withdraw from overextended or underperforming projects, reducing financial strain and reallocating resources to more strategic initiatives. Additionally, it strengthens China’s leverage in negotiations, as recipient nations are aware that continued funding is contingent on alignment with Beijing’s strategic objectives. However, this adaptability is a significant drawback for partner states. Projects that no longer align with Beijing’s priorities or lack strategic value can quickly lose support, leaving partner countries vulnerable to abrupt policy shifts.
Whilst China has presented a valuable opportunity for many nations, developing countries must recognise that its support for projects is not always steadfast. Beijing has a long history of withdrawing from commitments, often leaving recipient nations to bear the consequences. Ecuador serves as a stark example of these risks, even before China’s recent shifts in BRI priorities. Ecuador is grappling with the shortcomings of its hydroelectric infrastructure. Chinese SOEs have built or currently operate eight hydropower plants in the country. To start things off, construction at two of the eight (Mazar-Dudas and Quijos) projects has been delayed since December 2015 due to contract terminations for non-compliance. But by far, the most infamous project is the Coca Codo Sinclair dam. Constructed by the Chinese SOE Sinohydro and financed by the Chinese Development Bank, it was expected to meet nearly 35% of Ecuador’s daily energy needs. The dam has failed to hit its targets since it became operational, instead becoming a symbol of scandal. In 2018, inspectors discovered 7,648 cracks in the dam’s machinery, flaws that had been flagged earlier yet ignored regardless. The Ecuadorian government attributes the cracks to low-quality steel and substandard welding, but the government is not blameless for they sited the dam next to an active volcano. In addition to structural deficiencies, sediment buildup has repeatedly disrupted turbine operations, forcing periodic shutdowns to clear the reservoir. These issues represent critical failures in both planning and construction.
China’s response to its failures has only deepened frustrations. In 2022, a proposed deal would have allowed Sinohydro to retain operational control of the dam for 30 years in exchange for covering some of the repair costs. This would have meant that, for a small upfront payment, China would effectively profit from selling Ecuador its electricity whilst repairing a dam that should have been structurally sound in the first place. However, the deal collapsed when Ecuador’s Attorney General’s Office indicted 25 individuals on bribery charges related to the project. This included four Sinohydro employees and a former Chinese ambassador. As of December 2024, Ecuador’s hydroelectric infrastructure remains in crisis. Three hydropower facilities are grappling with “critical drought conditions” and regularly must choose between power blackouts or local water shortages. The blame falls on both China and Ecuador. The Ecuadorian government was eager to secure funding but failed to scrutinise the risks. However, China made commitments it could not uphold and prioritises damage control over fulfilling its obligations. As China recalibrates its BRI priorities, similar challenges are likely to emerge in other nations that have relied on Chinese-backed infrastructure projects without adequate safeguards.
China’s wavering commitment to long-term projects appears to be an ongoing issue, one that may only be amplified by its new approach to the BRI. Take the instance of the Funan Techo Canal in Cambodia. The Funan Techo Canal is regarded as Prime Minister Hun Manet’s flagship project. Whilst the canal offers clear short-term benefits, such as job creation and growth, it is more than just an economic initiative. It serves as a political legacy project, celebrating his predecessor, Hun Sen’s, retirement and reinforcing Hun Manet’s ambition to lead Cambodia into a new era. The 180-kilometer canal aims to connect the capital, Phnom Penh, with the port city of Kampot, providing direct access to the Gulf of Thailand. Currently, More than 30% by volume of seaborne cargo to or from Phnom Penh is routed through Cai Mep and Cat Lai, Vietnamese ports near Ho Chi Minh City. By constructing the canal, Hun Manet seeks to reduce Cambodia’s reliance on Vietnam amidst deteriorating relations. In the longer term, proponents claim the canal could unlock untapped mineral deposits in Kampot and oil reserves in the Gulf of Thailand, significantly lower shipping costs, and irrigate new agricultural areas.
Cambodia cannot afford to build this canal alone. The $1.7 billion price tag accounts for 4% of Cambodia’s GDP without factoring in maintenance and upkeep costs. In May of 2024, Cambodia announced that a deal had been reached with China Road and Bridge Corporation (CRBC), which would front the full cost of the canal through a BOT agreement. However, in June 2024, the arrangement changed. China would now only contribute 49% of the total cost, whilst Cambodia would become the majority shareholder with a 51% stake. Hun Manet has rejected claims that the state budget or foreign lending would finance Cambodia’s share. Instead, Cambodia’s half of the money is supposedly sourced from three companies: The State-owned Sihanoukville Autonomous Port and Phnom Penh Autonomous Port alongside what is simply described as “another private company”. These three entities are said to provide financing through private loans in exchange for the right to operate the canal for 50 years after its completion. The opaque nature of the funding raises concerns about the canal’s financial feasibility, but Hun Manet has committed too much politically to back down. After all, he has constantly reiterated that “We must build this canal at all costs”.
It is difficult to share Hun Manet’s vision once the costs are weighed against the benefits. Proponents argue the canal will decrease shipping costs by offering a shorter route for exports. However, 60% of Cambodia’s trade flows to East Asian and North American markets, where the Vietnamese route remains the shortest. Additionally, concerns have been raised about the project’s financial feasibility, with critics arguing that its projected costs are too low, whilst its anticipated revenues are overly optimistic. The project has even sparked regional controversy. Vietnam is alarmed by the canal’s potential to disrupt the flow of the Mekong River in violation of the Mekong Agreement. Further unease has emerged within ASEAN, as some members worry about Cambodia’s increasing military ties with China. Whilst the canal itself is unlikely to serve a military purpose, Cambodia’s growing Chinese ties and the Ream naval base are major sources of anxiety.
Unsurprisingly, Hun Manet’s situation has deteriorated further. There is even a chance that Chinese financing has dried up entirely. A particularly concerning Reuters report from November 2024 highlighted growing doubts about Chinese funding for the project. Citing four individuals briefed on or involved with the initiative, the report revealed that Beijing had expressed reservations about the canal and had still not made definitive financial commitments. The Cambodian government has dismissed claims that they are struggling to secure funds, whilst China has reiterated its strong ties with Cambodia but has declined to comment on specific details related to the funding.
The critical question is: if China has backed out of this project, then why? Most likely, the canal no longer aligns with the BRI’s evolving priorities. The project lacks transparency, does not demonstrate clear economic returns, and carries significant geopolitical risks. Beijing would be cautious not to alienate ASEAN members over the canal. This has caused China to downsize its role if not totally withdraw from the project. For now, the Chinese embassy in Cambodia has responded to claims that it pulled all funding as “complete nonsense”, and recent reports indicate that the lack of progress was due to the recently completed demarcation process. Hun Manet has invested significant political capital into the canal, and its failure could severely undermine his nascent administration. So until physical progress is made or money clearly put on the table, the canal’s future remains uncertain, posing a significant challenge to Hun Manet’s leadership.
A 2024 report from the Lowy Institute underscores China’s mixed record in Southeast Asia as a whole. It states:
“China has become Southeast Asia’s largest infrastructure financing partner. Yet, there is an enormous gap between what Beijing promises and what it has delivered, amounting to more than $50 billion in unfulfilled project financing, with more than half of this reflecting projects that have either been cancelled, downsized or seem unlikely to proceed.”
The report attributes this gap to multiple factors, including China’s focus on financing large-scale megaprojects, which are often plagued by delays, political instability, poor stakeholder engagement, and increasing challenges with stranded fossil fuel projects. The Philippines has withdrawn its loan applications from three Chinese-backed major megaprojects: the South Long-Haul Railway (Bicol Line), the Panay-Guimaras-Negros Inter-Island Bridge, and the Mindanao Railway. Valued at approximately $8.5 billion. Despite conducting a feasibility study, China lost interest in the PGN Island Bridge amidst the downturn in spending during COVID-19. The Bicol Line stalled after Chinese state banks failed to disburse committed funds, and a similar failure to act on financing requests prompted Manila to abandon the Mindanao Railway loan application. These withdrawals have occurred amid escalating South China Sea tensions, which have strained diplomatic ties with Manila and likely influenced its decision to withdraw from Chinese support. Whether driven by financial concerns or strategic manoeuvring, China’s pattern of overpromising and underdelivering risks eroding its credibility as a development partner. More broadly, it signals a tendency to commit to projects that later become financially unviable or are leveraged as geopolitical bargaining chips, raising questions about the long-term reliability of Chinese infrastructure financing.
These cases from Cambodia, the Philippines, and Ecuador raise serious questions about China’s reliability as a partner. There are two lessons to consider. First, when the political or strategic interests of the host country no longer align with those of China or when Beijing’s domestic policies necessitate a redistribution of resources, there are few mechanisms in place to compel China to honour its financial commitments. As a result, countries engaging in BRI projects must not only ensure that their initiatives align with China’s goals at the time of inception but also be aware that these goals can shift. Second, the Ecuador case highlights a deeper structural risk: even when China follows through on financing and construction, the quality and long-term viability of these projects are not guaranteed. Ecuador rushed into a deal with China without sufficient oversight, only to be left with a structurally flawed dam and little recourse when issues emerged. Corruption, weak accountability, and China’s reluctance to take responsibility for failures mean that recipient countries bear the burden when projects go wrong. This underscores the importance of rigorous due diligence, stronger regulatory oversight, and contingency planning for nations seeking Chinese investment.
As China continues to adjust its spending priorities, the real question is: who is next? Beijing’s economic shifts are forcing it to be more selective with its investments, moving away from politically motivated megaprojects toward more financially sustainable initiatives. Partner nations must be prepared not just to secure Chinese financing but to ensure they are not left picking up the pieces when Beijing’s priorities inevitably change.
Filling the void: emerging opportunities in global infrastructure development
For states suddenly facing China’s withdrawal from major infrastructure commitments, alternative financing options exist. For instance, the Philippines is not abandoning its grand infrastructure projects. Instead, it has sought new partners for the cancelled projects. Japan, India, and South Korea have offered to finance the Mindanao Railway, whilst the Bank of South Korea has stepped in to support the Panay-Guimaras-Negros Inter-Island Bridge. Financing options for the South Long-Haul Railway are also being explored. Ecuador, too, has turned to alternative partners. Whilst the country is still struggling to address the failures of the Cocoa Codo Sinclair Dam, the U.S. has stepped in to assist with managing the project. However, the long-term consequences of Ecuador’s initial agreement with China remain unresolved.
Cambodia, on the other hand, faces a far more constrained set of options. Having alienated its neighbours and the U.S. through its deep reliance on China, it lacks the flexibility to pivot toward new partners. As a result, Hun Manet’s administration is left in a precarious position. He must either secure a firm commitment from Beijing to make the Funan Techo Canal financially viable or persuade investors that the project is a sound and profitable investment. This could happen in the near future, or it could take years. Whilst Japan is a strong alternative partner for Cambodian infrastructure, it is unlikely to step in and rescue the canal project in its current state. First, Cambodia was relying on a BOT model that would limit its immediate financial burden — an approach that Japan may not find attractive. Second, the project’s high cost and current financial infeasibility make it an unappealing investment for other states.
China’s focus on its domestic issues and the reputational damage it has incurred create opportunities for other countries and commercial entities in global infrastructure development. Whilst China remains deeply entrenched in the short term, growing dissatisfaction among partner states has left many yearning for a new partner. The countries best positioned to capitalise on this shift include Japan, South Korea, the European Union, the United States, and India.
South Korea and Japan are already positioned as competitors to China in infrastructure development, particularly in Southeast Asia. South Korea now aims to challenge China on a global scale, particularly in regions where frustration with China's dominance is growing. By fostering private-public partnerships and multinational initiatives like Official Development Assistance (ODA), South Korea seeks to become a global pivotal state. Whilst South Korea’s 2024 ODA budget is set at $4.7 billion, a modest sum compared to the BRI’s vast investments, it represents just one investment avenue. Notably, South Korea is expanding its focus beyond Southeast Asia, branching into global projects, such as energy initiatives in the Middle East, demonstrating a broader scope of engagement.
Similarly, Japan’s Free and Open Indo-Pacific (FOIP) strategy, launched in 2016, is widely regarded as a response to the BRI. FOIP emphasises high-quality construction and close collaboration with partners such as the United States. Under the leadership of Prime Minister Shinzo Abe, Japan committed $200 billion to global infrastructure development, focusing on creating projects that prioritise transparency, local involvement, and sustainability. Notable successes include the Neak Loeung Bridge in Cambodia, the Mass Rapid Transit System in Delhi, and the Nhat Tan Bridge in Vietnam.
India, the West, and Gulf states are collaborating on the ambitious India-Middle East-Europe Economic Corridor, which envisions “two sections: an eastern maritime link between India and the Gulf, and a northern section that would connect the Arabian Peninsula to Europe.” This initiative bears similarities to China’s BRI in its scope and ambition but reflects a multilateral approach to infrastructure development. The European Union has also entered the fray with its Global Gateway strategy, aiming to mobilise public and private investments of up to €300 billion. This initiative focuses on strengthening partnerships, particularly with African nations, and emphasises sustainable, high-quality infrastructure development.
Beijing’s shifting priorities and growing unpredictability present a critical opening for its competitors. Whilst Japan and South Korea have already carved out strong positions in infrastructure development, they now have an opportunity to consolidate their influence further, provided they can scale their construction capacity to meet rising demand. Unlike China, which prioritises rapid expansion and geopolitical leverage, Japan and South Korea emphasise quality and transparency, making them more attractive partners for nations wary of BRI-style pitfalls. Though they cannot match China’s sheer volume of projects, their ability to deliver high-impact, financially viable initiatives gives them a competitive edge in key markets. However, the U.S. and India have the most to gain if they can effectively capitalise on China’s setbacks. The U.S. has a particularly strong opportunity to step in as a reliable alternative, leveraging its vast financial resources and private sector expertise to support nations left stranded by stalled Chinese projects. This would allow Washington to regain some of the global influence it has ceded to Beijing, particularly in terms of soft power. In South Asia, India’s participation in the India- Middle East- Europe Economic Corridor offers a chance to counterbalance its exclusion from the BRI, which has left it sidelined in regional connectivity initiatives. The key advantage for all these players lies in their ability to foster private-sector investment. Unlike state-led initiatives, which are often subject to shifting political priorities, private firms operate under stricter financial scrutiny, ensuring that only commercially viable projects move forward. Additionally, private investment reduces the risk of abrupt policy reversals, a weakness that has plagued China’s BRI engagements. As Beijing recalibrates its economic outreach, the question is no longer whether other players can step in but who will seize the opportunity first.
Yet, just as the West seeks to challenge China in traditional infrastructure, Beijing is simultaneously shifting its focus toward sectors historically dominated by Western powers. Whilst China’s post-COVID economic recovery has been sluggish and its long-term outlook uncertain, it is making decisive moves in high-tech industries, including green energy, artificial intelligence, and semiconductor manufacturing. The BRI has laid the groundwork for China’s transition by establishing critical supply chains that will enable it to compete in technological sectors. Given the surging global demand for these technologies, Beijing may pivot from large-scale infrastructure toward exporting expertise in artificial intelligence, electric vehicles, renewable energy grids, and advanced manufacturing. This shift intensifies the broader geopolitical and technological rivalry, particularly as the U.S. and its allies scramble to contain China’s influence. Early clashes, such as the battle over 5G infrastructure, where the U.S. imposed sweeping restrictions on Chinese telecom firms, provide a glimpse into the next frontier of competition. Likewise, China’s rapid advancements in green energy technologies threaten to undercut the ambitions of the UK and the EU, which aspire to lead in the renewable energy sector. The future contest for influence will not be limited to roads, bridges, and railways; it will be fought over the technologies that power the next era of global development.
Ideas for Recommendations:
As Beijing recalibrates its approach to the Belt and Road, states and companies worldwide must be prepared to take advantage of new opportunities. However, as Beijing recalibrates its focus towards smaller, lower-risk projects and prioritises partnerships with financially stable countries, nations heavily engaged with large-scale Chinese financing may find their project sidelined or outright abandoned.
What specific steps must these countries take to navigate the next interaction of the BRI? and alternative financing options effectively? Below, we propose key recommendations for policymakers and stakeholders.
Developing States:
- Partnering with China requires careful assessment not only during project negotiations but also throughout the project's lifecycle. As China has demonstrated a willingness to withdraw from projects due to policy changes, states must undertake comprehensive risk assessments, including political and economic factors. Contingency plans should be prepared to address potential disruptions, especially for nations with strained relationships with Beijing.
- Policymakers should reduce their dependence on Chinese contractors by prioritising investment partnerships with China rather than relying solely on turnkey construction projects. Shifting toward joint ventures and co-financed infrastructure development would give states greater control over projects, ensuring continuity in the event of Chinese withdrawal. Additionally, this approach would facilitate knowledge transfer, strengthening domestic construction industries and enhancing long-term economic resilience. However, this strategy is most viable for states with the financial capacity to co-fund projects or access alternative lending sources. Importantly, such a shift would align with China’s evolving Belt and Road strategy, which increasingly emphasizes investment over direct contracting.
- Countries facing challenges from stalled or incomplete BRI projects must diversify their development strategies. Japan and South Korea are established alternatives, particularly in Southeast Asia. However, their capacity to support projects in regions farther afield may be limited. Nations should actively engage with multiple partners and explore regional collaborations to fill critical infrastructure gaps. With more states taking global infrastructure seriously, there will be more alternative funding options.
- Nations aligned with sustainable development priorities should capitalise on Beijing's increased focus on green energy and sustainable infrastructure. These projects present opportunities to rapidly deploy green energy solutions. Given that green energy is a cost-effective source of power, countries should position themselves as attractive partners by emphasising regulatory support and streamlined processes for renewable energy initiatives.
- For nations left behind by Chinese withdrawals, structural reforms may be necessary to attract Western funding. This includes enhancing governance frameworks, ensuring project feasibility, and demonstrating commitment to transparency. However, nations must also be realistic; projects deemed infeasible by China are unlikely to garner interest from other investors. Governments should focus on revisiting such projects, downsizing, or restructuring them to improve viability.
China’s rivals have a golden opportunity to eat into China’s market share in global infrastructure development. Here are our recommendations for the following countries.
South Korea and Japan:
Both countries possess significant domestic construction capacity and have been actively expanding their influence in infrastructure development, particularly in Southeast Asia.
- Neither country has the construction capacity to outmatch China in the sheer volume of projects. Instead, they should adopt a more strategic approach by concentrating their investments in specific industries or regions where they can offer a competitive edge, such as high-tech infrastructure, sustainable energy, or smart city development. Essentially, they will benefit from business as usual.
US:
The United States has a clear opportunity to assert itself in the global infrastructure market and counterbalance China’s influence. By providing transparent, sustainable, and high-quality alternatives to the BRI, Washington can strengthen its economic and strategic ties with developing nations while reinforcing its influence in the Global South. Seizing this initiative would allow the U.S. to shape the infrastructure landscape on its own terms, rather than just reacting to Beijing’s moves. However, if Washington remains passive, it risks ceding ground to China, not only in infrastructure development but also in emerging high-tech industries where Beijing is aggressively expanding. As China leverages its economic clout to gain a foothold in sectors historically dominated by the U.S., the competition will intensify, leaving Washington in a defensive position rather than dictating the global agenda.
India:
India has remained on the sidelines of the Belt and Road Initiative, as China has prioritised strategic partnerships with regional rivals, most notably through the China-Pakistan Economic Corridor. Beijing has also deepened its influence in neighboring states such as Sri Lanka, strengthening its foothold in South Asia. However, as China recalibrates its overseas commitments, India now has an opportunity to regain lost ground and expand its own regional and global infrastructure initiatives.
- To capitalise on this shift, India should accelerate the development of its own infrastructure projects, particularly by leveraging the changing geopolitical landscape in Europe. With the European Union increasingly focused on strategic autonomy, India has a window to push for deeper collaboration. Specifically, India should push European partners to develop a comprehensive investment plan for the India- Middle East- Europe Economic Corridor. A well-structured initiative could provide an alternative or additional model for connectivity and infrastructure while strengthening India’s economic and strategic ties with both Europe and the Middle East.
