## 2 Comparison of BRI with Other Global and Regional Infrastructure Initiatives
### Investment Policy Orientation
Despite its high foreign liabilities, China's foreign currency reserves amounted to USD 3.32 trillion4 in 2024 Q3, exceeding the combined reserves of all G7 countries. In comparison, during the same period, the U.S. held about USD 0.04 trillion5, Japan USD 1.25 trillion6, Germany USD 0.38 trillion7, France and Italy USD 0.29 trillion8, the U.K. USD 0.19 trillion9 and Canada USD 0.13 trillion10. There is, however, a risk that China's high trade surplus and foreign exchange reserves could diminish if trade tensions with the U.S. intensify. These reserves are essential for stabilising the yuan, not only by enabling the central bank to buy back the currency when it depreciates but also financing international initiatives like the BRI, which often require foreign currency outflows. A decline in reserves would constrain China's capacity to support BRI projects directly through reduced capital availability and indirectly by weakening national income from net exports. This, in turn, could trigger higher imported inflation, deepen yuan depreciation, and potentially fuel capital flight, further eroding investor confidence ([PERSON], 2019). The effectiveness of private investment depends not only on market incentives but also on institutional quality and public oversight. In weak institutional settings, highly motivated private firms working alongside poorly monitored public officials can lead to inefficiencies or the misuse of funds, as seen in some PPPs in developing countries. While cost-cutting can improve efficiency, it may also reduce service quality if not properly regulated. To ensure positive welfare outcomes, infrastructure quality should be observable and tied to contractor performance. Where public engineering capacity is strong, greater public sector management may be more appropriate ([PERSON] and [PERSON], 2020). Therefore, although the alternative initiatives aim to address the capital flight, market instability, and debt risks associated with the BRI, there is still a risk that they may not attract sufficient private sector investment to fund large-scale infrastructure projects. The private sector consists of profit-maximising business entities that prioritise asset security over the fulfilment of development objectives. In this regard, private investors may tend to be highly selective, favouring lower-risk infrastructure projects that promise good returns on investment but having short investment cycles ([PERSON], 2021). Consequently, economic infrastructure such as roads, railways, satellite communications, and clean/renewable energy technologies could be more likely to be prioritised over social infrastructure projects like hospitals and universities, which have a lower likelihood of recovering capital costs but provide significant positive externalities to society. In contrast, Chinese companies are observed to be less risk adverse in committing capital to infrastructure projects in countries with volatile economic, regulatory and political environments such as in the Middle East due to China's strategic interests and generous state backing for state-owned investment and construction companies ([PERSON] and [PERSON], 2022; [PERSON], 2024). Under the modern PPP model in emerging Asian economies, private firms are responsible for the entire lifecycle of infrastructure projects, including maintaining existing assets and financing subsequent phases of investment, with the government playing a more limited role in providing loans and guarantees. While PQI emphasises sustainability and quality infrastructure, this model may still entail significant financial and operational risks for private firms, unless it is supported by ample risk management policies from the public sector ([PERSON], 2020). The requirement for private investors to finance and manage investments exposes them to adverse global macroeconomic conditions, such as unanticipated currency depreciation and GDP growth volatility, resulting in a risk of market failure and declining investor demand for infrastructure projects.