Chinese President Xi Jinping surprised an audience of world leaders as he outlined China's decision to modify the Belt and Road Initiative in crucial areas including: project selection, environmental risk assessment and financing. He was speaking at the second Belt and Road Forum, which convened April 26 in Beijing.

China's BRI features ambitious plans to build modern-day Silk Road connectivity projects, such as seaports, airports, railways and roads across 60 countries covering all continents at a colossal cost of $900 billion. Developing countries have offered some support, but the scheme has been widely criticized on a number of counts in developed countries.

The U.S., Germany, France, Australia and Japan have been especially critical, pointing to a lack of transparency and a refusal to share business opportunities with non-Chinese companies.

At the Forum's open session, Xi signaled a course correction. “Everything should be done in a transparent way, and we should have a zero tolerance for corruption,” he said.

The Chinese President tried to counter criticism that nearly 90% of the businesses emerging out of the Belt and Road program went to Chinese companies and there was little for foreign firms to share. "The Belt and Road is not an exclusive club," Xi said at the gathering.

Signs of China’s readiness to modify the infrastructure development program began to emerge in recent months after it allowed close ally, Pakistan, to shelve an electricity project, and accepted a 30% cost reduction in a high-speed rail project in Malaysia. In effect, Malaysia had closed down the project for several months and eventually forced China to renegotiate the terms.

“Xi Jinping is trying to deliver a readjusted BRI, providing more opportunities for non-Chinese companies to participate, delivering greener and better quality projects, being more attentive to their local economies in humane impact as well as to the recipient country’s debt sustainability,” said Jean-Pierre Cabestan, Professor at the Dept. of Government and International Studies of Hong Kong Baptist University.

International Monetary Fund Managing Director Christine Lagarde backed efforts by China to improve and refine the program but asked for more changes particularly where it comes to rules for procurement of construction equipment from across the world.

She said the BRI could “benefit from increased transparency, open procurement with competitive bidding and better risk assessment in project selection.”

Financing challenges

Xi invited foreign and private-sector partners to help fund China-backed infrastructure projects. Earlier offers restricted project financing only to Chinese banks and agencies. In the past, non-Chinese banks and lending agencies have been closed out.

Critics have also slammed BRI for opacity and for saddling recipient countries with costly loans that they cannot repay. For example, Sri Lanka recently was forced to sign away commercial control of its Hambantota port for 99 years because it could not reply Chinese loans.

The Chinese president said "We also need to ensure the commercial and fiscal sustainability of all projects so that they will achieve the intended goals as planned.” He went on to say that his government will now offer a “debt-sustainability framework” to encourage compliance with international standards in infrastructure contracting.

"The debt issue in developing countries should be treated objectively. If debt growth is accompanied by infrastructure improvement, enhancement of people's livelihoods and productivity and poverty reduction, it will be beneficial for the sustainability of long-term debt," said Yi Gang, head of China’s central bank.

Some analysts asked how such a financial mechanism could prove to be independent and reliable if China’s central bank is still defending the country’s system of offering long-term loans for Chinese construction projects in foreign countries.

The event is being attended by presidents or prime ministers of 37 countries and heads of major institutions like World Bank, the International Monetary Fund and Secretary-General of the United Nations. Countries that have sent heads of government are Russia, Italy, Portugal, Greece, Austria, Switzerland, Czech Republic, Hungary, Serbia, Chile, Singapore, Philippines, Kenya, Pakistan, Egypt Mongolia, Vietnam and Thailand. About 110 other countries and institutions have sent official delegations.

On its part, China is getting worried about not being able to sell the BRI to the developed world, which is a better customer, occupying a region that would serve Beijing’s geopolitical goals. The program so far has been largely confined to financially weak countries like Sri Lanka, Pakistan, Myanmar, Venezuela and Sudan. Few are likely to be able to repay Chinese loans running into hundreds of billions of dollars within the next 10-20 years.

Most developed countries, including the U.S., have sent low- or mid-level officials to the Forum. The U.S. was particularly critical of the BRI.

“We continue to have serious concerns that China infrastructure diplomacy activities ignore or weaken international standards and best practices related to development, labour protections, and environmental protection,” the U.S. embassy in Beijing said in a statement.

Speaking at the Forum, British Finance Minister Philip Hammond said the BRI must work for everyone for it to turn into a sustainable reality. He offered British expertise in project financing.