China’s Belt and Road Initiative pivots from mega infrastructure to ‘small but beautiful’ projects

The second China-Central Asia Summit took place in Astana, the capital of Kazakhstan, in June and was attended by Chinese President Xi Jinping. The Astana Declaration of the Second Central Asia-China Summit said that Central Asian nations and China intend to strengthen investment and industrial cooperation in not only infrastructure but also “green” minerals and alternative energy sources. China and Central Asian countries expressed their readiness to cooperate in agriculture, welcoming the UN General Assembly Resolutions of “promoting sustainable forest management including afforestation and reforestation, on degraded lands, including in drylands, as an effective solution to environmental problems”. The parties also discussed the importance of working together to improve poverty reduction policies and their readiness to hold joint events in such areas as culture, cultural heritage and tourism.

At the 2024 Forum on China-Africa Cooperation (FOCAC), meanwhile, China pledged to support new clean energy projects and signed development finance deals for solar projects in Namibia and Zambia.

“These primarily service-oriented sectors are less costly than the previously prioritised infrastructural projects,” says Oh Ei Sun, principal adviser of the Pacific Research Center of Malaysia. “Second, it is still in line with some of BRI’s five pillars, namely facilitating capital flow and promoting people-to-people exchanges. For many of those developing countries, the shift from infrastructure to services in the BRI is perhaps better than no attention from the major economies at all.”

In the first half of 2025, the biggest sector of China’s BRI financial engagement was energy, at 35 per cent, according to a July report from the Griffith Asia Institute at Australia’s Griffith University. It noted that, compared to the early years of the BRI, the transport sector dropped to its lowest level of 7.2 per cent of BRI financial engagement, compared to 28 per cent in 2018 and 17.7 per cent in 2023.

In the report, Christoph Nedopil, director of the Griffith Asia Institute, wrote that China’s engagement in green energy was the highest in more than a decade, with US$9.7 billion in wind, solar and waste-to-energy. “China’s energy-related engagement in [the first half of ] 2025 again set a record as the greenest since the BRI’s inception in 2013.” The report also said that Chinese green energy and hydropower investment increased to US$3.1 billion in the first half of 2025, up from US$1.3 billion in the first half of 2024.

In total, China’s BRI financial engagement in 150 countries rose to US$124 billion in the first half of 2025—more than the US$122 billion for the whole of the previous year, according to the Griffith Asia Institute.

Before 2025, foreign direct investment (FDI) and contracting in BRI had plummeted from the highs of the mid-2010s, though there seems to be some recovery since the pandemic ended, says Jean-Marc Blanchard, executive director of the Mr and Mrs SH Wong Center for the Study of Multinational Corporations, a US think tank. “BRI investment and contracting in Latin America and the Caribbean seems to have fallen ... [while] the Middle East and Southeast Asia have risen in significance in terms of FDI as well as contracting.”

China’s overseas development financing (ODF) plunged by about 90 per cent from US$62 billion in 2016 to US$6 billion in 2024, according to a report by the Boston University Global Development Policy Center in July: “Beyond the headline reduction in lending, another trend stands out: over the last five years, Chinese DFIs (development finance institutions) have made an abrupt pivot in their sectoral focus.

“From 2020 to 2024, the top sector has been finance, particularly lending to development finance intermediaries like national development banks (NDBs) and regional development banks (RDBs).” China’s net lending to developing countries fell from US$22.8 billion in 2018 to minus US$33.6 billion in 2024, according to the World Bank. Negative lending means repayments exceed loan disbursements.

A report from the Lowy Institute, an Australian think tank, published in May, said: “Some argue that China’s lending boom in the 2010s reflected an intentional effort at ‘debt-trap diplomacy’ aimed at pushing countries into debt problems so that geopolitical concessions could later be extracted. There is limited evidence to suggest that this was the purpose of the Belt and Road Initiative lending surge.”

The report also stated that, in 2025, the world’s poorest and most vulnerable countries will make record high debt repayments totalling US$22 billion to China.

“China’s role as a lender has passed a watershed. The nation that was once the developing world’s largest source of new finance has now wholly transitioned to being the world’s largest single destination for developing country debt service payments. The Belt and Road Initiative hit its peak in the mid-2010s; peak repayment was reached in the mid-2020s. Now, and for the rest of this decade, China will be more debt collector than banker to the developing world.”

Blanchard explained that debt and problems with infrastructure projects have played a role in driving less BRI FDI, contracting and lending in recent years. He cited problematic BRI projects including the Myitsone dam in Myanmar and Gwadar port in Pakistan.

The Myitsone dam was halted in 2011 by then Myanmar President Thein Sein amid local opposition to the dam, where a Chinese SOE, China Power Investment Corporation, was the project manager. A deepwater port was completed in Gwadar on the southern coast of Pakistan and handed over to a Chinese operator, an SOE named Chinese Overseas Ports Holding Company, in 2013. However, shipping traffic and cargo volumes at Gwadar port have been low, German news outlet DW reported in May 2024. Gwadar is in the vicinity of armed militant groups. The completion of the Chinese-funded New Gwadar International Airport was repeatedly delayed last year due to security concerns. It finally began operations in January.

“These projects showed the power of domestic political problems to prevent projects from coming to fruition and caused problems for China’s international image,” Blanchard says.

Hu adds, “I don’t think the reason for the BRI’s shift to small projects is because of bad BRI infrastructure projects. You can’t win every time. If loans can’t be repaid, you negotiate; it is very seldom you write it off.”

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