China’s Belt and Road project runs into debt jam

AFP, BEIJING

Mon, Sep 03, 2018 - Page 1

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 Chinese President Xi Jinping (習近平), the initiative also known as the “new Silk Road” envisions the construction of railways, roads and ports around 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 might lack the means to pay back the Asian giant.

“It is not a China club,” Xi said in a speech on Monday last week to mark the project’s anniversary, describing Belt and Road as an “open and inclusive” project.

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

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

During a visit to Beijing last month, Malaysian Prime Minister Mahathir Mohamad said his country 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 multibillion-dollar China-Pakistan Economic Corridor.

Meanwhile, 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 percent of its debt held by Beijing.

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 US$1.4 billion project.

“China does not have a very competent international bureaucracy in foreign aid, in expansion of soft power,” J Capital Research cofounder and research director Anne Stevenson-Yang told reporters.

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

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

The huge endeavor brings much-needed infrastructure improvements to developing countries, while giving China destinations to unload its industrial overcapacity and facilities to stock up on raw materials.

However, a study by the Center for Global Development, a US think tank, found “serious concerns” about the sustainability of the sovereign debt in eight countries receiving Belt and Road funds.

Those 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, the study said.

In Djibouti, the IMF has said that the country faces a “high risk of debt distress” as its public debt jumped from half of GDP in 2014 to 85 percent in 2016.

Africa has long embraced Chinese investment, helping make Beijing the continent’s largest trading partner for the past decade.

A number of African leaders are to gather in Beijing today for a summit focused on economic ties which is to include talks on the Belt and Road program.

China bristled at criticism.

At a daily press briefing on Friday, Chinese Ministry of Foreign Affairs spokeswoman Hua Chunying (華春瑩) 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’ overall foreign debt.