SILK ROAD HITS DEBT JAM

Nations grumbling about being saddled with high Chinese loans

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.

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.

Last Monday, Xi said China’s trade with Belt and Road countries had exceeded US$5 trillion (RM20.5 trillion), with outward direct investment surpassing US$60 billion.

But some are starting to wonder if it is worth the cost.

During a visit last month, Prime Minister Tun Dr Mahathir Mohamad said Malaysia would shelve three China-backed projects, including a US$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.

The exiled leader of the opposition in the Maldives, Mohamed Nasheed, has said China’s actions in the Indian Ocean archipelago amounted to a “land grab” and “colonialism”, with 80 per cent of its debt held by Beijing.

Sri Lanka has 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 US$1.4-billion project.

“China does not have a competent international bureaucracy in foreign aid, in expansion of soft power,” said Anne StevensonYang, co-founder and research director at J Capital Research.

“So, not surprisingly, they’re not very good at it, and it brought up political issues like Malaysia that nobody anticipated.

“As the yuan becomes weaker, and China is perceived internationally as an ambiguous partner, it’s more likely that the countries will take a more jaundiced eye on these projects,” she said.

A study by the Center for Global Development, a United States think tank, found “serious concerns” about the sustainability of the sovereign debt in eight countries receiving Silk Road funds.

They were Pakistan, Djibouti, Maldives, Mongolia, Laos, Montenegro, Tajikistan and Kyrgyzstan.

The cost of a China-Laos railway project — US$6.7 billion — represents almost half of the Southeast Asian country’s GDP.

In Djibouti, the International Monetary Fund has warned that the Horn of Africa country faces a “high risk of debt distress” as its public debt jumped from 50 per cent of gross domestic product in 2014 to 85 per cent in 2016.

On Friday, Foreign Ministry spokesman Hua Chunying denied that Beijing was saddling its partners with onerous debt, saying that its loans to Sri Lanka and Pakistan were only a small part of those countries’ foreign debt.

IMF head Christine Lagarde, had raised concerns about potential debt problems and advocated greater transparency.

“It’s not a free lunch. It’s something where everybody chips in.”