China‘s flagship One Belt, One Road infrastructure program has far from enough financing right now, representatives from Beijing said in New York last week.
Chinese President Xi Jinping first announced in 2013 an ambitious initiative to build a network of infrastructure in underdeveloped regions south and west of China, similar to the ancient “Silk Road” that connected Asia with Europe.
This May, Xi kicked off a high-profile “Belt and Road Forum for International Cooperation” in Beijing with a speech announcing China will contribute an additional 100 billion yuan ($14.68 billion) to the Silk Road Fund. He added that the China Development Bank and the Export-Import Bank of China will set up special financing worth a total of 380 billion yuan.
Despite those announcements, “there’s a very big gap there,” said Wei Jianguo, vice chairman of the board for the China Center for International Economic Exchanges, a think tank with close ties to the Chinese government.
The estimated cost for One Belt, One Road is in the trillions of dollars, and forecasts keep climbing. In February, the Asian Development Bank doubled previous estimates in a report that said developing Asia will need to invest $1.7 trillion a year, or about $26 trillion through 2030, to maintain growth momentum, eradicate poverty and tackle climate change.
Chinese leaders have emphasized One Belt, One Road is a project Beijing initiated in the expectation that other countries will participate.
The project does have some help from other nations. The Asian Infrastructure Investment Bank, which China launched last year with major U.S. allies, has already financed nine projects with a total $1.73 billion, according to an official Chinese media report earlier this year.
Depending on private companies for help
But to solve the bulk of the financing gap, Beijing is counting on private companies to pitch in. Chinese firms have already invested $50 billion into One Belt, One Road projects, according to Michael Hirson of Eurasia Group.
“I think we can only say the Belt and Road initiatives are only making progress when we see enterprises making progress,” said Zhao Jinping, director of the research department of foreign economic relations in the development research center of the Chinese State Council. He was also speaking at the press conference, held June 14 at The Asia Society in New York.
Zhao cited official figures that showed in the first three years of the program’s existence, more than 1,000 companies invested in 56 projects in more than 20 countries, generating $1.6 billion in local tax revenue and creating 180,000 jobs.
The Chinese officials expect other local companies participating in the program to add to economic growth in a similar way.
“There’s no way anyone can credibly promise that the Belt and Road project can generate that level of economic promise,” Scott Kennedy, a China expert at the Center for Strategic and International Studies, told CNBC in a phone interview.
“It still sounds like China is in sales mode rather than serious analysis mode,” he said. “People don’t know what is a belt and road project and what is not.”
The Center for Strategic and International Studies lists 37 pages on its website of proposed, ongoing and completed projects — mostly railways and highways — for One Belt, One Road.
The U.S. sent a representative to attend the One Belt, One Road forum in May and some firms such as General Electric are reportedly already involved with related projects. However, the U.S. is notably not part of the AIIB.
GE and the White House did not immediately respond to a CNBC request for comment.
“As the content of the phrase has become enriched, it also will take some time for foreigners to understand what it’s about,” Zhao Qizheng, former Minister of the Chinese State Council Information Office, said at the press conference. “We can’t tell you exact sums because that’s going to vary from project to project.”
By Evelyn Cheng