Banks see little risk involving initiative
Credit risks in markets linked to the Belt and Road Initiative are under control, and major Chinese banks are building firewalls to ensure sustainable financing for overseas infrastructure projects, senior banking executives said on Thursday.
They were responding to concerns that Chinese investment and loans would increase the debt burden of some developing countries and the risk of potential sovereign credit defaults would undermine the asset quality of Chinese banks.
Ding Xiangqun, vice-president of China Development Bank, a State-owned policy bank, said that Chinese loans will not increase the local debt burden and the risks associated with the loans are under control.
“A majority of the projects we supported have generated sufficient cash flow to pay back the loan and the interest,” Ding said at a news conference, stressing that economic value is one of the priorities when the bank selects projects.
Sun Ping, vice-president of the Export-Import Bank of China, another Chinese policy lender, said the bank has established risk-control mechanism on a country-by-country basis.
“We have set a debt limit on each country. When the debt level reaches the limit, we will carefully control our lending pace to that country,” Sun said, adding that widespread sovereign debt defaults and rising nonperforming loans will be unlikely.
The outstanding value of loans extended by the two policy lenders to markets related to the Belt and Road Initiative have reached $200 billion, according to the China Banking Association.
Big Chinese commercial banks also have participated. The Industrial and Commercial Bank of China, the world’s biggest bank by assets, has 412 projects in its pipeline involving a total investment of $337.2 billion, according to the bank.
While the overall risk in projects under the Belt and Road Initiative is controllable, Chinese banks should be cautious about the credit risks in countries with high deficits and external debts, analysts said.
The two-day Belt and Road Forum for International Cooperation, scheduled to start in Beijing on Sunday, will be an ideal occasion for the participants from around the world to not only contribute their views on how to accelerate win-win cooperation, but also to acquire a better understanding of China’s intentions in promoting the Belt and Road Initiative.
Concerns, and even suspicion, have arisen over the intentions behind the initiative since it was proposed in 2013, most of which stem from a misperception and misunderstanding of China’s strategic motivation.
But it is only natural that with the recovery of the global economy still sluggish, international trade flagging, and globalization facing a backlash, China is willing to share its development wisdom and provide public goods to the world now that it is in a position to do so. China’s stepping forward with a vision and means for opening the doors to opportunities for common development should be welcomed, for it comes at a time when combined efforts are needed to achieve interconnected and inclusive growth and shared prosperity.
Since 2013, China has invested more than $50 billion in countries involved in the initiative, and a total of 56 economic and trade cooperation zones have been established, generating nearly $1.1 billion in tax revenue for the host economies and creating 180,000 local jobs. These early harvests should consolidate global confidence in the initiative’s ability to inject vitality into economies and promote shared development and prosperity.
Indeed more and more countries have come to appreciate the Belt and Road Initiative as they recognize that its hallmarks are openness, inclusiveness and mutual benefit.
That representatives from more than 100 countries will attend the forum in Beijing is evidence that the initiative is not an exclusive membership club but rather an open platform dedicated to extensive consultations, joint contributions and shared benefits.
Both developed and developing economies will take part in the forum and play the roles they want to play. Under the initiative, each participating country, big or small, is an equal partner whatever its economic strength.
Although the initiative has been proposed by China, China does not seek to dominate it. Nor is it using it to vie for global leadership. Instead the initiative is an embodiment of China’s view that the world is a close-knit community of shared destiny.
By hosting the forum, it is providing a venue for partners to gather so they can explore new ways to achieve inclusive growth and shared prosperity, which will reinvigorate the global economy and give a shot in the arm to globalization.