Tashkent, Uzbekistan (UzDaily.com) -- The British publication Financial Times published an article “China retreats from the world: rethinking the“ project of the century ”Xi”, which analyzes the current state and prospects of the main initiative in China’s foreign policy strategy “One Belt, One Road ”(OBOR).

In May 2017, at the international OBOR forum, promoting his "project of the century", Chinese President Xi Jinping promised to allocate US$1 trillion for the construction of infrastructure in developing countries and finance these projects through their own financial institutions.

However, the current reality deviates sharply from the planned scenario of the PRC leader. Today, there is a certain change in emphasis in Beijing’s policy to promote OBOR, which may mean a reduction in the volume of government loans to the countries participating in the initiative, as well as a more careful approach to the selection of investment targets based on their economic feasibility and the prospects for the return on investment.

I. In recent years, overseas lending to the PRC has fallen sharply against the backdrop of a revaluation of the Belt and Road Initiative (BRI) initiative. 2016 - 2019 state-owned banks of the PRC have reduced foreign financing from US$75 billion to US$4 billion. In the period 2008-2019, two Chinese banks provided loans of US$462 billion, slightly less than the funds provided by the World Bank (US$467 billion) over the same period.

In the area of global project financing, such a sharp reduction in lending by Chinese banks is tantamount to an "earthquake." If it continues, it will exacerbate the infrastructure financing gap, which, according to ADB estimates, is already US$907 billion a year in Asia alone. In Africa and Latin America, where Chinese lending also makes up a significant portion of infrastructure financing, the gap between what is required and what is available will also widen.

II. Beijing is mired in debt renegotiation negotiations with a number of countries. Today 23 states are in risky debt dependence on China for OBOR projects, including Pakistan, Djibouti, Maldives, Laos, Mongolia, Montenegro, Tajikistan and Kyrgyzstan, etc.

In addition, the economic crisis due to the consequences of the COVID-19 pandemic has further exacerbated the debt burden of borrowing countries. In this regard, the implementation of most infrastructure projects "failed".

The further fate of many projects will depend on the ability of the PRC to renegotiate loan agreements with countries that are currently in dire need of debt relief.

III. The PRC reduces foreign investment and concentrates more resources inside the country, which is facilitated by the following factors.

First, there is a lack of financial resources, especially at the present time, when China is forced to concentrate huge financial resources to restore its economy, which has been badly affected by the consequences of the pandemic.

In particular, the Chinese state-owned banks, which are the main donors of the BRI, have declared the priority of allocating loans within the PRC in the amount of US$84.5 billion.

Second, Beijing’s “double circulation” strategy, which places more emphasis on developing the domestic market than on trade with the outside world. In May of this year. The PRC authorities said they are going to "actively develop the advantages of the country’s super-large market and the potential of domestic demand to create a new development model that provides for double circulation: domestic and international, which will complement each other."

Third, the growing tension in relations between the United States and China. The Trump administration’s policy of "breaking ties" and sanctions has prompted Beijing to fundamentally rethink its drivers of growth and redouble its efforts to link economic growth to domestic demand and sustain domestic innovation to secure a strong position in global value chains. According to experts, if state-owned enterprises decide to return to the domestic market in order to follow the wishes of the PRC authorities, the budgetary financial resources for foreign investments will accordingly continue to decline. Washington continues to criticize the OBOR for justifying containment of China, reproaching Beijing for imposing a "debt loop" on its project partners by providing tied government loans.

In general, it is noted that the current rethinking by China of its initiative testifies to a tacit recognition that the policy of "bonus" foreign lending was poorly thought out. The BRI will remain a priority for Xi Jinping, which has already invested huge amounts of money, but at the same time, it requires careful development of debt sustainability mechanisms and social and environmental impact instruments.