Explainer: What is the Belt and Road Initiative and why has Australia vetoed a Victorian agreement?

In a decision on Wednesday night, Foreign Minister Marise Payne said the controversial initiative was inconsistent with Australia's foreign policy and was struck down under foreign veto laws.

However, the move has inflamed tensions with Beijing, with foreign officials saying the decision would affect the already strained relationship between the two countries even further.

The Belt and Road Initiative is a major foreign policy and economic scheme put forward by the Chinese government in 2013.

The initiative, estimated to be worth $1.5 trillion, involves the Chinese government and state-run companies helping to fund major infrastructure projects such as ports, railways, airports and pipelines in other countries.

Maritime trade routes with many of the countries that have signed on to the scheme have also been established as part of the initiative.

The Belt and Road Initiative is considered a major tentpole of China's foreign policy under its president Xi Jinping.

Since it was set up eight years ago, as many as 139 countries have signed on to the Belt and Road Initiative.

While at first the initiative targeted countries in the Asia-Pacific region and parts of Africa, countries in nearly every continent have become part of Belt and Road in some form.

Some of the countries that have signed up to Belt and Road include Indonesia, Thailand, Sri Lanka, Egypt, Poland, Belarus, Portugal, Chile, Panama and Bolivia, to name just a few.

Professor Sarah Bice, a director at the Australian National University's Institute for Infrastructure in Society, said while much of the scheme was targeted at developing nations, developed nations were also part of it.

"As recently as 2019 Italy had signed on to it, and other European countries have signed on as well," she said.

"The Belt and Road Initiative has come to symbolise so many different things to different countries."

Put simply, the initiative has been controversial from the start due to many seeing it as China trying to gain influence in other countries, some even likening it to foreign interference.

Many countries who have not signed on to the initiative have said China could have ulterior motives behind it.

Honorary professor at the Australian National University's Strategic and Defence Studies Centre Leszek Buszynski said the initiative was a way for China to alter long-standing diplomatic relations between nations.

"It's a way for China to gain influence with these countries so that they develop closer relations with Beijing and draw them closer to China, while undermining the influence of the US," he said.

"The second motive is the economic one, to bind these countries more closely to China's economy and make sure that many of the Chinese state-owned companies benefit."

The initiative has led to China owning significant pieces of infrastructure in other countries.

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In one instance, Belt and Road helped to fund development at the strategic port of Hambantota in Sri Lanka, but when the south-Asian nation failed to pay back its debts for the project, it was handed over to China as part of a 99-year lease.

Professor Buszynski said along with foreign influence, debt represented a major problem for some of the countries who signed up for Belt and Road.

"Some would say China's goals of the Belt and Road Initiative are strategic," he said.

"It's also become an outlet for state-owned companies in Beijing to be able to roll over construction and keep them occupied as well."

Victorian Premier Daniel Andrews signed a memorandum of understanding with China to be part of the initiative in 2018.

The premier said the deal with Beijing would help with many infrastructure projects across the state.

"With the biggest infrastructure program in our state's history under way, we have the design and delivery skills China is looking for, meaning more jobs and more trade and investments for Victorians," Mr Andrews said at the time.

The memorandum also allowed for Victoria to invest in Chinese government-backed projects overseas.

While a deal was struck between Victoria and China, no financial obligations had been signed as part of the arrangement.

Victoria signing up for the initiative represented a major break in foreign policy for Australia, and also led to significant tension between the Victorian and federal governments.

Under new foreign veto laws that were introduced late last year, the federal government on Wednesday said it was ripping up the agreement.

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Foreign Minister Marise Payne said in a statement the arrangement was "inconsistent with Australia's foreign policy or adverse to our foreign relations".

The move by the federal government has been welcomed by the Opposition along with those in the national security space.

While many of the deals between China and foreign nations as part of the initiative were done through their central government, the deal with Victoria was unique in that it was done through its state government only.

Professor Buszynski said Victoria was short-sighted in signing up to the initiative.

"They thought Belt and Road was a shortcut to develop infrastructure and to create jobs. I don't think they were quite aware with the bigger picture and how it operates," he said.

"Victoria was certainly an outlier in Belt and Road because in all other countries it has been a central government initiative."

In the hours since the announcement was made, China's foreign mission said the decision would put relations with Australia in further trouble.

A statement from China's embassy in Canberra criticising the move has been viewed on Chinese social media more than 100 million times in less than one day.

It comes off the back of multiple trade disputes between Australia and China over items such as barley, wine and seafood.

While relations between the two countries have been frosty at best in recent years, Professor Buszynski said China likely foresaw Australia's decision.

"They likely knew something like this would be coming," he said.

"They might have publicly expressed outrage, but they likely knew this was coming way back when they they were imposing trade sanctions."

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