China’s Belt and Road project runs into debt jam
BURIED BY THE DRAGON? Some countries may be unable to repay Beijing
BEIJING: China’s massive and expanding “Belt and Road” trade infrastructure project is running into speed bumps as some countries begin to grumble about being buried under Chinese debt.
First announced in 2013 by President Xi Jinping, the initiative also known as the “new Silk Road” envisions the construction of railways, roads and ports across the globe, with Beijing providing billions of dollars in loans to many countries.
Five years on, Xi has found himself defending his treasured idea as concerns grow that China is setting up debt traps in countries which may lack the means to pay back the Asian giant.
“It is not a China club,” Xi said in a speech on Monday to mark the project’s anniversary, describing Belt and Road as an “open and inclusive” project.
Xi said China’s trade with Belt and Road countries had exceeded $5 trillion, with outward direct investment surpassing $60 billion.But some are starting to wonder if it is worth the cost.
During a visit to Beijing in August, Malaysia’s Prime Minister Mahathir Mohamad said his country would shelve three China-backed projects, including a $20 billion railway.
The party of Pakistan’s new prime minister, Imran Khan, has vowed more transparency amid fears about the country’s ability to repay Chinese loans related to the multi-billion-dollar ChinaPakistan Economic Corridor.
Sri Lanka has already paid a heavy price for being highly indebted to China. Last year, the island nation had to grant a 99-year lease on a strategic port to Beijing over its inability to repay loans for the $1.4-billion project.
“China does not have a very competent international bureaucracy in foreign aid, in expansion of soft power,” Anne Stevenson-Yang, co-founder and research director at J Capital Research, told AFP. “So not surprisingly they’re not very good at it, and it brought up political issues like Malaysia that nobody anticipated,” she said.
A study by the Center for Global Development, a US thinktank, found “serious concerns” about the sustainability of the sovereign debt in eight countries receiving Silk Road funds. Those were Pakistan, Djibouti, Maldives, Mongolia, Laos, Montenegro, Tajikistan and Kyrgyzstan.
The cost of a China-Laos railway project — $6.7 billion — represents almost half of the Southeast Asian country’s GDP.
In Djibouti, the IMF has warned that the country faces a “high risk of debt distress” as its public debt jumped from 50% of GDP in 2014 to 85% in 2016.
Africa has long embraced Chinese investment, helping make Beijing the continent’s largest trading partner for the past decade. On Monday, a number of African leaders will gather in Beijing for a summit focused on economic ties which will include talks on the “Belt and Road” programme.