In October 2013, President Xi Jinping of the People’s Republic of China (PRC) unveiled the Belt and Road Initiative (BRI), an ambitious plan to build infrastructure and improve transport connectivity in more than 60 countries across Asia and beyond. Since that time, the BRI has become so key to China’s national grand strategy that it has been codified in the country’s constitution (Xinhua, October 24, 2017). To date, the PRC has signed BRI agreements with 137 countries. However, while memorandums of understanding between Beijing and BRI countries have ramped up—with 62 deals being signed with new partner countries from June 2018 to June 2019 (BRI Portal, undated)—the increase in political partners has not led to a comparable increase in commercial activity.
The BRI is largely a branding strategy for not-for-profit construction that pre-dates the 2013 announcement. In general, energy projects have made up the bulk of BRI-related construction and investment abroad. Apart from energy, China has prioritized BRI-related construction projects in the transportation sector and investment in commodities. This fits with China’s longstanding ambitions to secure its energy supply, and improve connectivity for commodities trade and transport links abroad.
Recently, some observers have expressed concern regarding China’s expanding influence in BRI countries’ telecom industries. As evidenced in authoritative open source articles, Beijing has prioritized its Digital Silk Road (DSR) initiative, which is part of the larger Belt and Road Initiative. However, to date, relevant telecom deals have been minor. According to the Chinese Global Investment Tracker (CGIT) database, telecom deals make up only around two percent of investment projects and less than one percent of construction projects.  This may be because the DSR is still in its early stages. It is also worth caveating that the CGIT excludes smaller contracts and deals that do not reach the $95 million threshold. This excludes some satellite and fiber optic cable projects, which are specifically prioritized under DSR.
However, even as BRI publicity is being ramped up, and the initiative seeks to expand into telecom and other strategically important sectors, the PRC’s foreign investment spending is not keeping up with these trends. This article highlights a few possible reasons for this discrepancy: ranging from lower foreign exchange reserves to the possibility that Beijing is choosing to underreport the number of BRI projects following increased international criticisms of the initiative. This does not suggest that the BRI should not be scrutinized; if anything, this should prompt additional efforts to understand what comes next.
BRI Construction Peaks—and Then Declines
Construction, not investment, is the main economic activity in the BRI. For purposes of this article, investment is defined as a Chinese company taking (partial or complete) ownership of an asset, whereas construction is defined as an exchange of services for payment in the host country (AEI, July 10). When construction projects include a lengthy operational phase, such as build-operate-transfer projects, they are considered investments. Lengthy concessions to operate ports, like the lease held by China Merchants Ports (CMPort) on the Sri Lankan port in Hambantota (China Brief, January 5; China Brief, January 5), are also treated as investments. Aggregating BRI deals over $95 million from all current 137 countries from the period of October 2013 through June 2019, construction projects totaled $432 billion and investment totaled $257 billion in value. 
Construction outpaces investment in the BRI due to both commercial and political reasons. On the commercial side, most BRI countries are developing countries with few profitable assets worth acquiring. On the policy side, China’s overseas not-for-profit construction push is a symptom of the overcapacity problem within state-owned enterprises (SOEs).  SOEs carry out the overwhelming majority of contracting around the world, both within and outside of the BRI framework. The PRC’s unwillingness to let SOEs fail results in a need to provide business projects for bloated firms—which in turn creates incentives for a constant stream of global construction projects.
Based on past years’ data, we would have expected to see $6 to $8 billion more in construction funding during the first half of 2019. However, the number of BRI construction projects in the first half of the year fell by 40 percent, and the volume of funding fell by almost $14 billion in the same period. In the past three years, the CGIT recorded an average of 83 construction projects in the first half of the year; however, in the first half of 2019 it only reported 58. One of the reasons for the drop could be diminishing transparency among Chinese companies: the BRI is personally tied to Chinese President Xi Jinping, and fear of failure, or fear of attracting criticism over BRI projects, may lead Beijing and relevant SOEs to reduce reporting of BRI-related activities.
Table: Construction and Investment Figures for the BRI, 2014–First Half 2019 (U.S. Dollar Billions) (Source: China Global Investment Tracker)
We can see from the above table that the peak year for construction in the BRI (and worldwide) was 2016. Funding may have fallen in subsequent years due to competing demands on Beijing’s foreign exchange reserves. Chinese construction projects are usually accompanied by cheap financing from the Chinese government, and this financial support comes from China’s foreign exchange reserves.  When the BRI was announced in 2013, foreign exchange reserves were rising consistently, peaking at nearly $4 trillion in June 2014 (State Administration of Foreign Exchange (SAFE), May 7, 2018). Since then, foreign exchange reserves have dropped, stabilizing around $3.1 trillion (SAFE, August 2019). While this remains a significant amount, Beijing is becoming increasingly hard-pressed to throw money around, especially when foreign exchange reserves are also being threatened by trade tensions with the United States (South China Morning Post, November 7, 2018).
What Is China Building, and Where?
Chinese construction contractors working abroad are primarily engaged in energy and transport projects: throughout BRI countries since 2014, Chinese companies have contracted work on energy projects worth $164 billion, and transport projects worth $140 billion. Real estate construction in the same countries—including housing, cement plants, and other forms of construction—is valued at $45 billion. Under the umbrella of BRI energy projects, hydroelectric dams account for $40 billion of contracts, with the majority of projects by cash volume located in Pakistan, Indonesia, and Laos. Coal-fired power plants are the next largest category for energy—accounting for $35 billion in contracts—with Pakistan the largest host for coal projects by cash volume. Railroad projects represent the highest volume of transport contracts at $59 billion, followed by roads at $47 billion. Maritime transportation construction (e.g., port building) is the third-largest category, at $21 billion. Construction outpaces investment in transportation because it is not common to acquire equity in another country’s transportation infrastructure. 
One of China’s stated goals in the BRI is to improve transport connectivity. On the surface, transportation infrastructure construction meets that goal. However, it is unclear whether BRI host countries will have the capabilities to maintain these large projects, and the commercial viability of many projects remains questionable. In some cases, Chinese companies continue involvement in providing maintenance and operation services projects after construction has finished—as in the case of the Hungary-to-Serbia high-speed railway built by China Railway Signal & Communication Corporation Limited (China Daily, June 27). This can benefit the host country; it also extends Beijing’s strategic presence while avoiding the sensitive issue of appearing to take even partial ownership in other countries’ transport infrastructure.
The top ten recipients of Chinese-led construction projects (in value by billions of U.S. dollars) are listed below. Most of the top countries on the list hold a large volume of energy contracts with Chinese companies; Nigeria, Bangladesh, Malaysia, and Iran also hold major rail contracts.
|Top Recipients of Construction, 2014-2019 H1 ($ Billions)|
Table: Top Recipients of Chinese Construction Projects, 2014–First Half 2019 (U.S. Dollar Billions) (Source: China Global Investment Tracker)
Investments in the BRI
Since 2014, investment in the BRI has been divided across three key sectors: with energy investments near $92 billion, metals at $38 billion, and transport at $31 billion. Recent expansions in metals are not due to a renewed interest in metals during the first half of this year, but rather due to the induction of Chile and Peru as BRI members (in November 2018 and May 2019, respectively) (Santiago Times, November 4, 2018; Reuters, April 24, 2019), who together add around $15 billion to earlier deals in metals. During the first half of 2019, the number and volume of China’s global investment deals dropped sharply, back to levels consistent with 2011. If the current spending patterns continue, we can expect to see a drop in total BRI-related spending abroad for 2019.
|Italy (prior to BRI affiliation)||20.8|
Table: Top Investment Recipients in the BRI, 2014 – First Half 2019 (in U.S. Dollar Billions) (Source: China Global Investment Tracker)
The largest deals in the BRI so far this year were in energy. In April, the state-owned China National Offshore Oil Corporation (CNOOC) and China National Petroleum Corporation (CNPC) invested a joint total of $4.04 billion for a 20 percent stake in an Arctic natural gas project with Russia’s Novatek (Reuters, April 25). Pakistan was the second largest investment recipient this year, with two greenfield energy projects signed by Datang and China Energy Engineering. The share of greenfield investment in the BRI rose from 36 percent to 50 percent in the first half of the year, although the total amount was stable around $8 billion. Greenfield investment activity is higher in BRI countries than in the rest of the world because there are fewer assets ready for acquisition.
Outside of energy and metals, Chinese companies are also looking to pick up assets in more developed BRI economies such as Singapore and Italy. Although Italy’s entry into the BRI framework initially raised concerns regarding growing Chinese influence in the European Union, no investments or construction projects materialized during the first half of the year (Council on Foreign Relations, March 27).  In March, the China Communications Construction Company (CCCC Ltd.) signed a cooperation agreement with the Port of Trieste, but the agreement has so far failed to lead to any concrete projects (Port of Trieste, March 23). Some of the largest previous Chinese investments in Italy focused on automobile companies, like ChemChina’s $7.86 billion acquisition of Pirelli in 2015 (Wall Street Journal, March 22, 2015). However, rather than indicating a renewed interest in the Italian market earlier this year, ChemChina has reportedly considered reducing its stake in Pirelli (Bloomberg, February 27).
For the first half of 2019, BRI investment participation by private firms was reportedly the lowest on record both by volume and by share, down to 13 percent from 34 percent in the first half of 2018.  Private firms prefer to invest outside of the BRI, where there are higher returns. In the first half of the year, only a quarter of Chinese worldwide private investment went to the BRI. The largest deal was Guangzhou-based livestream platform YY’s $1.08 billion purchase of Bigo, a social media platform in Singapore (YY Press Office, March 4). Remaining private deals in the BRI went to Vietnam, Malaysia, Indonesia, Guinea, and the Philippines.
Telecommunications and the “Digital Silk Road”
Both Beijing and Washington are paying more attention to the Digital Silk Road (DSR), which has the declared aim of improving information technology and digital connectivity (Center for American Progress, February 28). A close look at the telecom data in the CGIT reveals that, to date, the DSR’s commercial footprint remains small. Telecom deals make up 2 percent of investment (14 transactions total) and less than 1 percent of construction data for the BRI. Early examples of investment in telecom include: upgrades from 3G to 4G in Thailand and Pakistan; fiber optic cables upgrades in Greece; and collaboration on 5G technology in South Korea between KT Net and China Mobile. 
One significant caveat is that many telecom projects–including laying fiber optic cables—often do not reach a value of $95 million, and thus the CGIT does not capture them. The PRC’s telecom footprint is understated in the CGIT, as indicated by the proprietary dataset of the research and advisory firm Pointe Bello.  Multiple Chinese companies—including China Mobile, Huawei, and China Unicom—are building fiber optic cables with smaller contracts under $95 million in BRI countries.
Since 2014, most of China’s global telecom investment deals have been in Britain, with a total value of $5.4 billion; and in the United States, with a total of $3.5 billion. The value of telecom deals in the UK is about the same as the value of deals in all 137 BRI countries combined. The U.S. Government has taken steps to deny Chinese investments in telecom based on security concerns (China Brief, February 1). Some BRI countries have taken note: in New Zealand, for example, concerns over espionage led the government to remove Huawei from the country’s 5G technology development in 2018 (South China Morning Post, November 28, 2018.).
The surveillance features of Chinese telecom may prove to be a draw for some authoritarian governments—and a source of concern for advocates of civil liberties. Earlier this year, China Telecom took a 40 percent stake in Philippines Mislatel, now Dito, for $860 million (Reuters, November 6, 2018). The company aims to provide 5G services in the Philippines within five years. However, local press outlets have already expressed concerns about the Philippines doing business with a company that bolsters China’s surveillance state (Rappler, July 9).
Frantic Chinese reactions to sanctions on ZTE and Huawei last year show that the United States has the tools to harm Chinese telecom giants. However, the United States needs to first identify where and how Chinese telecom developments in the Belt and Road are active before it can craft a response. For example, in the case of a treaty ally like New Zealand, the United States has a stake in keeping Huawei out of the telecom infrastructure for national security purposes. Other cases, such as Zimbabwe’s use of Huawei technology for domestic surveillance, may have less of a bearing on U.S. intelligence operations and communications security, but present challenges to bolstering democratic values and the rule of law around the world (WSJ, August 15).
The PRC’s investment and construction spending around the world is slowing down—and so is spending on the BRI, despite 62 new countries joining the initiative in the last year. Investment in the BRI is secondary to construction, and will remain that way unless more developed countries are added to the list of BRI partners. Commercially, energy remains the focus of both construction and investment. The budding Digital Silk Road currently has little commercial weight behind it—although here the strategic utility of even just a handful of successful projects should not be discounted. If the grip around foreign exchange in Beijing grows tighter, money for BRI construction and investment projects will be harder to find—and without other funding options, the BRI’s commercial importance will diminish.
Cecilia Joy-Perez is an analyst with the research and advisory firm Pointe Bello. Her research focuses on the PRC’s global construction and investment projects.
 The Chinese Global Investment Tracker (CGIT) is a database jointly maintained by the American Enterprise Institute and the Heritage Foundation. The database may be accessed at: http://www.aei.org/china-global-investment-tracker/.
 Author’s calculations, using data from the CGIT.
 For details on CMPort’s investment in the Sri Lankan port, see: Sirilal, Ranga, ‘Chinese Firm Pays 584 Million in Sri Lanka Port Debt to Equity Deal,’ June 20, 2018, https://www.reuters.com/article/us-sri-lanka-china-ports/chinese-firm-pays-584-million-in-sri-lanka-port-debt-to-equity-deal-idUSKBN1JG2Z6.
 For an example of China’s financing, see: Zhuan Ti, ‘Indonesian banks given $3b loans from lender,’ China Daily, March 11, 2016, http://www.chinadaily.com.cn/cndy/2016-03/11/content_23821014.htm.
 Author’s calculations, using data from the CGIT.
 Italy is now in the BRI, but nearly all Chinese investment in Italy occurred before its inclusion in the Belt and Road Initiative. For discussion of Italy’s affiliation with the BRI, see: Dario Cristiani, “Italy Joins the Belt and Road Initiative: Context, Interests, and Drivers,” China Brief, April 24, 2019. https://jamestown.org/program/italy-joins-the-belt-and-road-initiative-context-interests-and-drivers/.
 Readers may notice a significant change in the numbers for private firms between this paper and a previous paper by the author (Cecilia Joy-Perez and Derek Scissors, “Be Wary of Spending on the Belt and Road,” American Enterprise Institute, Nov. 14, 2018. http://www.aei.org/publication/be-wary-of-spending-on-the-belt-and-road/.). This is largely due to the change in the countries that are included within the BRI framework as of the time of this writing.
 See: Li Ping, ‘CEO: China Mobile’s 4G service leads market in Pakistan,’ China Daily, October 5, 2018, http://www.chinadaily.com.cn/a/201810/05/WS5bb70085a310eff303280c6c.html; Khettiya Jittapong and Manunphattr Dhanananphorn, ‘UPDATE 2 – Thailand’s AIS and True win 4G spectrum licenses,’ Reuters, November 12, 2015, https://www.reuters.com/article/telecoms-stocks-4g-idUSL3N1371QO20151112; ‘Forthnet teams up with Chinese firms to fund Greek telecoms network,’ Reuters, May 13, 2017, https://www.reuters.com/article/greece-china-telecoms/forthnet-teams-up-with-chinese-firms-to-fund-greek-telecoms-network-idUSL8N1IF0JX; Caroline Gabriel, ‘China Mobile buys 40% stake in Korea’s new operator,’ Rethink Research, October 29, 2015, https://rethinkresearch.biz/articles/china-mobile-buys-40-stake-in-koreas-new-operator/. A caveat on analyzing telecom investments using the CGIT: many telecom projects, including laying fiber optic cables, often do not reach a value of $95 million, and thus the CGIT does not capture them.
 This assertion is confirmed by the proprietary dataset maintained by Pointe Bello.