This year marks the 10th anniversary of China’s Belt and Road Initiative (BRI), and the analysis excerpted below offers an insight into how it has fared vis-a-vis the Western-dominated financial system and lending initiatives. The foundation of this Western-dominated system was laid at the Bretton Woods Conference in 1944. The meeting established the IMF to ensure the stability of the international monetary system, and offer policy advice and financial assistance to countries in economic crisis. Its “sister organization”, the World Bank, focuses more on long-term assistance through loans and grants, supporting infrastructure and poverty reduction in developing countries.
Efforts to democratise these institutions have been made, but both the IMF and World Bank still remain under significant Western influence. Western countries are overrepresented on the IMF’s board and voting arrangements, while all the IMF’s managing directors have been European. All the World Bank’s presidents, save one acting president in 2019, have been U.S. citizens. Both institutions are based in Washington, D.C.
China’s role in multilateral banks like the IMF and WB has expanded as its economy has grown, but Beijing continues to criticize the current global debt governance system as “dominated by the ‘Paris Club-IMF-World Bank’ structure of the West”, and has chosen to create its own path to expand its economic influence globally.
China’s state capitalism offers a unique alternative to Western infrastructure and development initiatives for the first time in decades. Through its robust, globally integrated economy, technological expertise, and extensive industrial power, Beijing can help fund and build projects on a scale that rivals the West in a way not even the Soviet Union could achieve. Furthermore, Chinese assistance does not require political and economic reforms typically attached to Western developmental initiatives.
China’s approach has seen significant success. It has become the world’s largest creditor since 2017, and is lending more than the IMF, World Bank and Paris Club combined. With US$1 trillion in reserves and more than US$2 trillion in contracts, China’s BRI has transformed global trade routes and economic development.
To implement its vision, Beijing has deployed a network of national financial organizations, including the China State Construction Engineering Corporation (CSCEC), China Communications Construction Company (CCCC), China Development Bank (CDB), the Export-Import Bank of China, China Construction Bank (CCB), Silk Road Fund, China Investment Corporation (CIC), China International Development Cooperation Agency (CIDCA), and the People’s Bank of China.
China’s newfound leverage has seen it confront the West around the world. In 1990, for example, Western countries accounted for 85% of infrastructure construction contracts in Africa. Yet, from 2000—2020, Chinese entities provided $23 billion in funding for infrastructure projects across sub-Saharan Africa, more than double that lent by banks in the U.S., Germany, Japan, and France combined, according to a study by the Center for Global Development.
The economic lending and infrastructure practices of both the West and China have, however, faced criticism. Former Chief Economist at the World Bank, Joseph Stiglitz, has stated that the conditions placed on borrowing countries by the World Bank and IMF often cause significant pain for local populations, and stifle economic development in these nations. UN Secretary General António Guterres, urging for change, stated in 2023 that the IMF and World Bank benefit richer countries at the expense of poorer ones.
China’s projects have faced criticism for predominantly employing Chinese companies and workers, as opposed to making local hires, resulting in protests and attacks against them. BRI deals are also criticized for being opaque in terms of financing and implementation, and countries struggling to repay loans have found themselves giving up some autonomy to their export revenues. And while allegations of Chinese debt diplomacy are often exaggerated in Western media, Chinese economic opportunism has increased debt burdens and debt-for-equity swaps with BRI partners.
While these challenges remain complex, investment stands out as a potential remedy. Rather than engaging in blind competition, a more effective use of funds for all parties involved could be achieved by acknowledging and pursuing greater coordination between Western and Chinese economic interests. This has, fortunately, already begun in several areas.
