China Belt and Road Initiative spending hit by pandemic
The Chinese economy may appear to be rebounding - reportedly growing 4.9 percent between July and September - but its Belt and Road Initiative (BRI) projects have been adversely affected by the worldwide disruption, according to a GlobalData report.
The pandemic is causing a slowdown in BRI investments, postponements in project timelines, and in some cases, suspension or even cancellation of projects in Africa and Asia due to local government spending curbs. The Chinese government has also been curtailing investments in BRI projects owing to domestic financial constraints amidst growing debt problems.
“Despite much progress being made under the BRI investment since 2013, there has been criticism and push back against these projects in several countries following changes of governments or due to public outcry,” Dhananjay Sharma, construction analyst at GlobalData, says.
“This is partly due to lack of transparency surrounding these projects and the general terms favouring the use of Chinese contractors, materials and equipment, as well as labour. Consequently, there have been renegotiations on certain projects in terms of the overall cost or the cancellations of part or entire projects.”
The BRI is now spread across 138 countries, with the Chinese government signing 200 cooperation agreements for joint construction with 138 countries and 30 international organisations.
Cancellations include £7.6 billion Bagamoyo port in Tanzania; £2.30 billion worth of pipeline projects in Malaysia; power plant on Lamu Island in Kenya; airport project in Sierra Leone and expansion of a Bangladesh highway, while Myanmar is scaling back a £5.61 billion port project to a new £999 million budget.
China could come under increasing pressure to allocate more resources domestically rather than increase its investment in foreign projects.
"Reflecting the global disruption in projects, there has been a fall in the business turnovers of Chinese contractors. According to China’s Ministry of Commerce (MOFCOM), the foreign engineering businesses contracted to £61.1 billion by 12.6 percent year-on-year in the first eight months of 2020.
"Of the total, 58 percent was accounted by projects in 61 countries ‘along the belt and road’. The number of new contracts signed by Chinese contractors in January-August 2020 in those 61 ‘along the belt and road’ countries had contracted by 24.4 percent on a year-on-year basis,” the report concludes.
Webuild and Lane to build railway in Texas
Webuild, formerly known as Salini Impregilo, has announced a US$16bn agreement to build a high-speed railway between Dallas and Houston in Texas. The project has been described as the “final step” before financial closure for the company, which Webuild said was“foreseen in the coming months”.
Passengers using the 236-mile long railway, which was developed by Texas LLC, will travel in Japanese Tokaido Shinkansen bullet trains at 200mph, making one scheduled stop at Brazos Valley near Texas A&M University. This aims to shorten the total journey time between the two terminals from almost four hours to around 90 minutes, Texas LLC claims. The company hopes commercial operations will begin in 2026.
According to Webuild, the new line will aim to target an estimated 100,000 “super commuters” who travel between the two cities by car and plane every week. Webuild said it would cut greenhouse gas emissions by up to 101,000 tonnes per year.
This contract is an update on a preliminary design-build agreement signed with Texas Central LLC in 2019, valued at $14bn. The deal confirms the US as Webuild's single biggest market, comprising some 35% of the group’s total order backlog.
Around 17,000 new direct jobs will be created as a result of the project, as well as 20,000 indirect ones. U.S. suppliers from states aim to provide an estimated US$7.3bn of materials to construct the railway in conjunction with services provided by Italian suppliers.
Webuild and Lane will oversee the civil engineering works of the project. This includes the tracks themselves, the viaducts, and depot buildings.
Three facts about bullet trains
- The fastest commercially operated bullet train is not in Japan, but China. It is capable of reaching speeds of up to 268mph… with passengers onboard.
- Bullet trains are one of the safest ways to travel. Over 10bn passengers have been on board a bullet train and no-one has ever been killed on one.
- The “tunnel boom effect” is powerful enough to blow a freight train over. When a bullet train exits a tunnel at over 200mph, the resulting sonic boom effect is so strong, it could blow a normal freight train off its tracks.
Image: Texas Central LLC.