China is likely to work on smaller, less risky and more profitable trade-linked infrastructure projects overseas in the coming years after a number of larger ones under the Belt and Road Initiative encountered financial problems that drew international attention, analysts say. This matches what Chinese officials and state media began calling “small but beautiful” additions to the globe-spanning Belt and Road Initiative in 2021, the analysts said, with the projects possibly led by smaller state-run companies or private firms. “That would line up with China’s focus on a more sustainable approach to the Belt and Road Initiative, particularly right now as Beijing confronts worsening credit and debt distress across a range of partners,” said Nick Marro, lead analyst with the Economist Intelligence Unit forecasting and advisory service. “Less financially risky and more economically friendly would likely tick some of the boxes here.” The Communist Party-run People’s Daily said last month a series of “small but beautiful” projects had “landed one after another” in agriculture, healthcare and poverty reduction. The State Council Information Office said in February that these types of projects would “increasingly become reality” in the digital, healthcare and environmental spaces. The ideal project under this label would be led by a private firm or a provincial government-owned company, said Naubahar Sharif, a professor and acting head of the Division of Public Policy at the Hong Kong University of Science and Technology. Lacking the size of China’s state-owned engineering and construction giants, these companies would probably offer small-scale and profitable projects with little debt. The 40-megawatt Gulshat solar farm in Kazakhstan and the 281 MWh Merredin solar project in Australia were good examples, Sharif said. China touts belt and road to ‘illiberal’ Hungary as mood sours in Europe Risen Energy of Zhejiang province developed Gulshat in 2019 and sold it last year to China’s State Power Investment Corporation. The 37-year-old energy firm acquired its Australian solar farm in 2018, raised debt in Australia the following year and sold it in 2021. Risen’s investor relations office declined to comment for this report. Projects of this scale would allow local governments in China, including Hong Kong and Macau, to play bigger roles in the belt and road, Sharif said. “I think particularly private enterprises will be leading the way,” he said. “They can go to their shareholders and report profits.” The belt and road plan was launched in 2013 as a way of enhancing China’s trade links with the world and expanding its global influence. To date, 151 countries have joined the initiative. From 2013 until 2022, the total volume of Chinese trade of goods with nations involved in the Belt and Road Initiative reached nearly US$13 trillion, while two-way investment had topped US$230 billion by the end of 2021, according to the Ministry of Commerce. But the initiative has come under fire for leaving poorer countries in debt to China. Two Chinese creditors alone, Eximbank and the China International Development Cooperation Agency, have suspended more than US$1.3 billion in debt service in 23 countries, including 16 African nations, under a Group of 20 (G20) Covid relief programme, according to the China Africa Research Initiative at the Johns Hopkins University School of Advanced International Studies. Suspensions in Zambia totalled US$110 million, US$25 million in the Maldives, US$40 million in Tajikistan and US$378 million in Kenya, the Johns Hopkins data showed. China held 19.6 per cent of Sri Lanka’s US$37.6 billion external debt at the end of 2021. Cases like these have stirred accusations of “ debt trap diplomacy ” – meaning entrapping countries with loans that they cannot afford to repay, something Beijing has vigorously denied . How can China’s Belt and Road Initiative thrive when its members are at war? “I think President Xi [Jinping] expects a course correction on this, otherwise [Belt and Road Initiative] projects will gain a bad reputation and will negatively impact the image of China,” said Guilherme Campos, manager of international business advisory with Dezan Shira & Associates. “I think it is clear that the experience in Sri Lanka, Angola and other countries that are not so politically stable has resulted in a negative experience with the projects that were implemented there.” Austin Strange, assistant professor of international relations in the Department of Politics and Public Administration at the University of Hong Kong, said a major rationale for “small but beautiful” is about risk management. “Large infrastructure has been the hallmark of the [Belt and Road Initiative] over the past decade, and these projects generate major economic, social, and political uncertainty given their sheer scale and complexity,” he said. “They can also become reputational liabilities. Smaller projects are not as risky.” Chinese infrastructure developers might consider “mini” hydropower plants, smaller road projects and digital infrastructure projects that fetch a profit with little risk of volatility, Strange said. Small and beautiful could mean setting up a “platform” to develop tens of thousands of small and mid-sized companies with standardised payment methods, quality control and after-sale services aimed at boosting trade, said Victor Gao, vice-president of the Centre for China and Globalisation in Beijing. Tourism would be one target sector, he said. “Larger platforms can be set up to promote cross-border trade of unique products and commodities between and among these regions and countries,” Gao said.