It was always going to be about the numbers. In the first half of 2018, China’s foreign direct investment in the Belt and Road Initiative dropped 15% compared to the same period last year.

Spending edged down to US$7.68 billion, which was 12.3% of total FDI from January to June, the Ministry of Commerce stated. “Newly signed contracts amounted to $47.79 billion,” the ministry confirmed without revealing further details.

The slowdown comes at a time when Beijing is being dragged deeper into a trade war with the United States while realigning a cooling economy and pushing ahead with the “Made in China 2025” policy, which revolves around advanced technology.

Launched in a fanfare of nationalistic pride by President Xi Jinping in 2013, the Belt and Road Initiative has become an extension of the country’s global ambitions and the centerpiece of its economic foreign policy.

At the heart of the blueprint are ‘New Silk Road’ superhighways, connecting China with 68 countries and 4.4 billion people across Asia, Africa, the Middle East and Europe in a labyrinth of multi-trillion-dollar infrastructure projects.

Major developments include direct rail and road links in Eastern Europe, Central and Southeast Asia, Africa and the Middle East, as well as a controversial port-construction plan across vast swaths of the region.

Domestic problems

But as Beijing tackles domestic debt problems, and nations involved in the Belt and Road Initiative become increasingly apprehensive about taking on huge loans, Xi’s signature policy is showing signs of stress fatigue.

“The lowest hanging fruit has been picked [while there are] concerns among potential borrowers,” Jonathan E. Hillman, a fellow with the Simon Chair and director of the Reconnecting Asia Project at the Center for Strategic and International Studies, a Washington-based think tank, said.

“As historically low-interest rates rise, BRI borrowers could be caught between mushrooming payments and an unforgiving lender,” he added.

Data released by the Ministry of Commerce showed that Laos, Malaysia, Vietnam, Indonesia, Thailand, Cambodia and cash-strapped Pakistan were key countries for investment.

This has raised fears that China is using “debt-book diplomacy” to ensnare developing nations in Asia and beyond, according to a report written by Harvard scholars, which warned the US State Department of the impact of what are perceived to be cheap loans.

In a damning document released in May, the study highlighted 16 countries targeted by Beijing with Pakistan, Djibouti and Sri Lanka identified as the most vulnerable.

Coupled with the changing political and economic mood in China, a further spending squeeze for ‘New Silk Road’ ventures is highly likely.

Excessive overseas investment has come under fire from academics in a rare rebuke as they question the Xi administration’s overarching domestic policies and high-profile global projects.

An essay entitled Imminent Fears, Immediate Hopes by Xu Zhangrun, a professor of constitutional law at the influential Tsinghua University, which is Xi’s alma mater, highlighted these anxieties in what he described as “foreign aid.”

“Excessive foreign aid has caused people to tighten their belts,” Xu said. “China [has spent] billions [and] billions of dollars overseas. [Yet] national wealth, including the $3 trillion [of] foreign reserves, has [been] accumulated [by the] sweat of generations during the [past] 40 years.

‘Rich in oil’

“Recently, during the China-Arab Forum, it [was] announced [by Beijing] that $20 billion would be allocated to set up a so-called ‘Reconstruction Special Plan’ for Arab countries. Yet the Gulf nations are rich in oil, so why is China, which still has hundreds of millions of people [living in poverty], playing such a big role?” he added.

Since then, the debate about the economy and the political climate inside the country has mounted in academia.

A fellow colleague at Tsinghua University, Sociology Professor Guo Yuhua, was just as outspoken in an interview covered by Baidu, China’s equivalent of search engine giant Google, before it was taken down.

She talked about how the “demonization of democratization has been very successful” and why there has been no “change in the political system and ideology.”

“The economic system has shifted from a planned economy to a market economy, but there has not been a corresponding change in the political system and ideology,” Guo said. “The reason for the lack of change is the enormous resistance caused by the suppression of power.

“This will inevitably lead to the tearing of the giant of China, one leg going forward, striding into the market economy, while the other leg is slamming backward,” she added.

How this will affect the grandiose Belt and Road Initiative is open to conjecture. But it does appear that ‘wobbly legs syndrome’ is starting to slow investment in Xi’s ‘Big Idea.’