China’s ‘Silk Road’ project runs into debt jam

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BEIJING: China’s massive and expanding “Belt and Road” trade infrastructure project is running into speed bumps as some countries have begun grumbling 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 project.

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 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 $1.4-billion project. The huge endeavour brings much-needed infrastructure improvements to developing countries, while giving China destinations to unload its industrial overcapacity. But a study by the Centre for Global Development, a US think-tank, 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, according to the study. In Djibouti, the IMF has warned that the Horn of Africa country faces a “high risk of debt distress” as its public debt jumped from 50 percent 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. 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. China bristles at criticism. At a daily press briefing on Friday, foreign ministry spokeswoman 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’ overall foreign debt. “It’s unreasonable that money coming out of Western countries is praised as good and sweet, while that coming out of China is sinister and a trap,” she said.