Belt and Road initiative growth slows as Beijing tightens overseas lending

Since its launch in 2013, China’s Belt and Road Initiative (BRI) has represented a flagship foreign policy and economic strategy aiming to enhance infrastructure connectivity and trade across Asia, Africa, Europe, and beyond. With over 150 countries signing memoranda of understanding, the initiative has grown into a multi-trillion-dollar effort shaping global development patterns.

However, by 2025, international observers note that China’s capacity for assistance and influence through the BRI is beginning to face headwinds largely tied to Beijing’s internal economic struggles and shifting global dynamics. 

The current era of Chinese economic slowdown is amplifying risks throughout the BRI. China’s domestic growth is faltering, hobbled by a property market in crisis, demographic decline, and stunted productivity gains. Analysts warn that this economic squeeze is already threatening the stability of the lending that undergirds most BRI projects. Many recipient countries are facing rising global interest rates and weaker commodity prices, sharply increasing debt-servicing costs and forcing governments into unpopular austerity or IMF bailouts. For China, exposure to dozens of high-risk credit portfolios means looming financial stress on its own policy banks—a risk that could shake the underpinnings of the initiative itself.

The narrative that BRI brings prosperity and partnership now contends with the reality of backlash in target countries. Projects have repeatedly stalled or been cancelled due to local protests, scandals, and environmental destruction, ranging from the halted Myitsone dam in Myanmar to high-profile opposition in Malaysia and Panama. Mounting accusations over corruption, opaque governance, and disregard for local consent have undermined China’s image as a responsible development partner. Even where deals go ahead, many are collateralised by sovereign guarantees or future resource exports, making vulnerable countries dangerously dependent on Chinese lenders

Nonetheless, several indicators forecast a tapering of large-scale investment deals in the second half of 2025. International assessments highlight that although deal volumes remain robust, the scale of megaprojects and the overall magnitude of new commitments are expected to decline due to Beijing’s reassessment of fiscal priorities in light of economic growth concerns domestically. Despite attempts to green the BRI narrative and invest in renewable energy and “green” sectors, a considerable portion of new deals still involves fossil-fuel projects and high-carbon industry, complicating China’s ambition of reconciling economic growth with environmental commitments.
China’s economic growth has slowed significantly compared to previous decades of rapid expansion.  Key challenges include managing the aftereffects of the COVID-19 pandemic, demographic shifts with a rapidly aging population, and a complex geopolitical environment marked by conflicts such as the Ukraine-Russia war, which disrupt global trade and investment flows. The Chinese Communist Party maintains economic growth as a top priority to sustain social stability and political legitimacy. However, slower growth constrains available resources for generous foreign commitments. This has implications for BRI partner countries, particularly developing nations heavily reliant on Chinese financing for infrastructure and developmental needs.

Countries such as Sri Lanka and Zambia exemplify the potential fallout, having faced debt crises exacerbated by overreliance on Chinese loans. Sri Lanka’s handing over of the Hambantota port to China on a 99-year lease after debt default highlights the social and political risks inherent in China’s debt-led diplomacy under the BRI framework. These debt sustainability challenges are prompting Beijing to tighten oversight and regulate overseas projects more prudently to mitigate financial risks at a time of internal fiscal restraint.

Moreover, strategic geopolitical shifts are reshaping BRI dynamics. The exit of Italy from the initiative in December 2023, followed by Panama’s withdrawal in early 2025, signals diminishing enthusiasm among some major players and heightened contestation from Western powers. While China continues to explore new markets such as Colombia, fragmentation in the scope of the initiative indicates changing perceptions and constraints on China’s global infrastructure diplomacy.

Looking ahead, China’s BRI engagement is likely to focus on selective sectors that are synergistic with Beijing’s domestic industrial and environmental priorities. Investments in battery manufacturing, electric vehicles, renewable energy infrastructure, and supply chain resilience sectors are projected to sustain activity but may not match the scale or breadth of earlier years dominated by transport and heavy infrastructure projects. Thus, the qualitative nature of Chinese influence in BRI countries might evolve from broad-based infrastructural assets to more calculated, “green,” and technology-oriented investments.

The broader future of BRI reflects strategic reorientation amid economic challenges at home. China’s slowing growth and domestic turmoil are expected to reduce the scale of assistance and influence in the Belt and Road framework over time. Partner countries should prepare for a future where Chinese engagement becomes more circumscribed, strategically focused, and possibly contested by other global actors. This transition poses both risks and opportunities for BRI countries navigating the shifting currents of gthe lobal economic and geopolitical order.