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The Belt & Road (B&R) initiative has been widely lauded as a way to extend common development. However, one aspect is now coming up for increased discussion. China has pledged billions in development and investment in emerging economies in Asia, Africa and the Middle-East. Once these are rolled out, Chinese State-owned enterprises (SOEs) will be at the forefront of these efforts.

However, many of these countries have low or junk credit ratings. Foreign companies are wary of investing there, for fear of losing their money. The B&R cannot fix regulatory gaps, corrupt power structures or uncertain geopolitical situations overnight. There are signs that even Chinese SOEs are becoming concerned at the outlay they are being asked to provide.

The scope of the B&R is daunting. More than 60 countries and regions are involved. China pledged in May to add 100 billion yuan ($14.49 billion) to the Silk Road Fund as part of the country's efforts to provide greater financial support to the Belt and Road initiative. As exemplified by Chinese infrastructure booms in other parts of the world, SOEs will likely foot much of the bill.

However, some cautionary tales do suggest themselves. Back in 2010, China Railway Construction Corporation (CRCC) was scheduled to build the Mecca Light Rail in Saudi Arabia and it ran up losses of over $640 million.

Now, admittedly, China has engaged in large-scale reforms of its SOEs since 2010. The government has actively encouraged them to seek to turn a profit while maintaining more oversight over management decisions. A number of high-profile mergers have been seen between public companies in sectors where competition was not a priority.

Expectations for these reforms have varied. There was some hope that they would lead toward a more Western business model. This was shot down by Andrew Tilton, chief economist for Goldman Sachs for the Asia-Pacific, who told Bloomberg that "the intention seems more about efficiency and creating national champions that can compete globally."

This desire for global competition is exacerbated by the B&R. However, many of the chosen partners would not be anywhere near the top of recommended foreign investment destinations.

While central governments are usually more than happy to welcome Chinese investment, structural problems in these countries will not vanish. Venezuela is the most recent example of this.

Chinese companies have been drilling in the Orinoco Oil Belt and building road and rail infrastructure. The scale of the unprecedented crisis facing the country has put these investments, stretching into the billions of dollars, at risk.

Chinese investments in Africa have been as lucrative as they have been controversial. Many projects there have been accused of importing Chinese workers instead of hiring locals. One line of defense by the firms involved has been that a Chinese workforce makes projects go quicker and acts as a buffer against local political instability. That argument will not fly with the B&R. At its core, the initiative seeks to empower local communities, albeit with Chinese funding.

Fitch Ratings has looked at the projects carefully and has warned that Chinese banks, already overleveraged, face a dilemma in deciding between business considerations and diplomatic goals.

In 2015, China also allowed foreign investors to help in SOE reforms, including via mixed ownership. This was widely welcomed as a major step forward but any foreign investors will be bringing to the table a system of checks and balances on investments that SOEs will have to pay attention to.

While little information has been provided concerning any such foreign investments to date, the prospects could be good, as long as business guarantees are provided.