ROGER HIRST: Welcome to the Corona Correction Series in association with Refinitiv, I'm your host, Roger Hirst. There is a near unanimous expectation that policymakers will combine monetary policy such as quantitative easing with fiscal policy such as debt-fueled expenditure. Infrastructure projects are expected to be some of the biggest winners from this fiscal expansion.

The largest infrastructure project currently under operation is of course China's Belt and Road Initiative, which has expanded rail, road and sea communication routes throughout Asia, Europe and Africa and also into South America. But how have these projects fared during the recent slowdown in the Chinese economy and the additional blow of the Corona crisis? I asked Mike Rautmann, Refinitiv's Global Head of Emerging and Frontier Markets, specializing in infrastructure investments, specifically about the impact of the Belt and Road Initiative.

MIKE RAUTMANN: Refinitiv data shows that a total of 184 Belt and Road projects valued at about 137 billion dollars, were announced in the first quarter of 2020. That's approximately a 16 percent year on year drop. This is no doubt due to the slowdown in China's economy, and could very likely divert attention away from large Belt and Road projects in the future. Since 2013, China has invested billions in Belt and Road projects around the globe, with around 280 billion dollars invested in 44 countries that either are not rated by rating agencies, or do not have an investment-grade rating. The nature and risk of these investments has been exposed by the Covid-19 pandemic and the global economic slowdown that it has caused.

The effects on Chinese lenders aside, any defaults in BRI loans could be accompanied by suspension or cancelation of the related BRI projects and the knock-on effects for the Chinese implementors, many of whom are state-owned enterprises. We would therefore expect Beijing to work with some major lenders, multinational organizations such as the Asian Development Bank or the World Bank, to provide relief to some of these countries in the BRI map.

What this means is that there may be a reduced investment in BRI's smaller, less critical markets, where opportunities to connect to the global supply chain are more limited. Not so much investment in big new infrastructure, but rather focusing on smaller projects that are perhaps not government to government and are less risky, things like A.I., big data and data centers, and mixed ownership in PPP projects, something more smaller, more urban and perhaps more commercial.

China's view on BRI is very long-term. Some say at least a hundred years. So I don't see China panicking at this stage. There is a slowdown, yes, but I think it can be managed. And we're already seeing funds flowing back into China. In May alone, 20 billion dollars of foreign investment flowed back into China. And some of this will find its way into BRI projects, both existing and new.

ROGER HIRST: It shouldn't come as a surprise that the double whammy of an already slowing economy and the Corona crisis has put the brakes on the volume of projects. But there is still a healthy pipeline for this year. Some of the recipient countries are starting to struggle, with many becoming encumbered with debts tied to these infrastructure projects. Additional financing may come from the Asian Development Bank. But there have been recent strains on relationships, as some countries struggle with repayments.

Infrastructure overall, however, is still expected to see a huge uptick in interest as an integral part of the recovery packages of a post-Covid world. And the public private partnerships, rather than purely state finance projects, are likely to become an increasingly important part of future investment portfolios. We'll see you later with another update.