The Belt and Road Initiative and the overcapacity connection

The need to resolve overcapacity problems in domestic industry is frequently cited as a key reason for the Chinese government’s promotion of its Belt and Road Initiative (BRI). This chapter analyses the relationship between industrial overcapacity in China and the BRI. It assesses the degree to which the BRI and the related policy of “production capacity sharing†has had or may have an impact in overcapacity in China, and whether this domestic factor can explain China’s apparent attempt to reshape the global economic order through the BRI. The chapter uses trade and investment data and policy documents to analyse the relationship between the BRI and overcapacity, focusing on the steel and cement sectors as key inputs to infrastructure, which is central to the construction of the BRI. It argues that while overcapacity is a key domestic policy concern, the BRI can have only marginal impact even if reducing overcapacity were its goal. In this regard the BRI makes no global governance contribution to resolving the overcapacity problem, which, from a Chinese perspective, is dependent largely on domestic policy measures.