China's Involvement in Global Infrastructure
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This report provides a detailed analysis of China's involvement in global infrastructure.
With its Belt and Road Initiative (BRI), which is now thought to cover 132 countries, China has demonstrated its intention to increase its influence on global infrastructure development, and at the same time exporting its excess contractor capacity. The BRI, which was launched in 2013, is aimed at developing the modern day versions of the land-based "Silk Road Economic Belt" and the "Maritime Silk Road of the 21st Century". Under the initiative, China is seeking to improve infrastructure in emerging nations across the world, facilitating economic development through companies being able to transport goods more easily and cheaply between countries along various routes. Although there has been increasing wariness among governments in emerging markets over the risks of relying heavily on China for funding and construction contracting, the opportunities provided under the BRI can be attractive for governments with limited funding capacity and rising infrastructure needs. Reflecting the increasing significance of the BRI, according to a recent report from the Emerging Markets Forum, China has committed or dispersed around US$600 billion in loans since 2013 under the initiative, compared to US$490 billion by the group of multilateral development banks comprising the World Bank, the Asian Development Bank (ADB), the African Development Bank (AfDB), and the Inter-American Development Bank (IDB).
China's main international funding agencies, Export-Import Bank of China (China Exim Bank) and the China Development Bank (CDB), are funding US$334 billion of infrastructure projects globally that are currently in all stages of development up to and including execution, according to GlobalData. Of the total, projects with a combined total of US$249 billion are in execution. Railway projects account for the largest share of funding by sector (31.7%), with the Chinese agencies providing a total of US$105.9 billion, Sub-Saharan Africa taking US$66.6 billion and Eastern Europe US$31.4 billion. There is also substantial Chinese funding of oil and gas projects, although this is dominated by LNG projects in Russia. Power generation projects are a key target for China to expand its influence, with China Exim Bank and the CDB combined funding power generations projects with a total value of US$86.1 billion
China's involvement in infrastructure developments globally already goes beyond officially designated BRI and China-funded projects; according to GlobalData, Chinese contractors are involved in projects outside China at various stages of development with a total value of US$1.10 trillion. Much of this activity is in South and South-East Asia, with the total value of projects in which Chinese contractors are involved in the region totaling US$426.0 billion, of which US$298.4 billion relates to projects already in execution, with India, Pakistan and Bangladesh being key markets in South Asia. The Middle East and North Africa (MENA) as well as Sub-Saharan Africa are also target markets for Chinese contractors. In MENA the value of projects in which Chinese contractors are involved totals US$227 billion, while in Sub-Saharan Africa the value stands at US$240.0 billion, according to GlobalData.
Europe and Latin America are relatively small markets for Chinese contractors, but the total values of projects in which Chinese contractors are involved, US$71.1 billion and US$72.7 billion respectively, are still sizeable and a reflection of the increasingly global spread of works. However, with the recent incorporation of several Latin American countries into the BRI, China's influence in Latin America is further strengthening. In January 2018, China officially invited Latin America to join its BRI as part of its push to include the region into its global reach. In the advanced markets of Western Europe and North America, as well as China's North Asian rivals of Japan and South Korea, Chinese contractors face intense domestic competition and are involved in very few projects. The EU, the US and Japan are also engaged in their own initiatives to broaden their influence and build closer economic ties with key emerging market regions.
Chinese contractors have expanded their activities internationally at a rapid pace in recent years. Based on all projects tracked by GlobalData, annual spending on projects (outside of China) involving Chinese contractors increased from US$65.5 billion in 2014 to US$118.9 billion in 2018. Assuming all projects proceed as planned and that spending is evenly distributed over the execution phase of projects, spending is estimated to rise to US$133.4 billion in 2019 before reaching US$162.9 billion in 2020. Spending on projects with Chinese contractors was highest in South-East Asia up to 2018, but it is projected that Sub-Saharan Africa will top the regional list in 2019, with spending on these projects totaling US$31.1 billion, ahead of Middle East and North Africa with US$29.7 billion, and South-East Asia with US$25.4 billion.
Reflecting limited capacity and technological know-how of domestic contractors in Sub-Saharan Africa, Chinese contractors are involved in 41% of the region's infrastructure projects by value, with the share being as high as 74% in airport construction projects, and 63% in marine and inland water projects (mostly port facilities). Chinese contractors also have a significant involvement in road and railway projects in Australia, but this is owing mainly to John Holland Group being a 100%-owned subsidiary of China Communication Construction Company (CCCC).