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

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. (BAY ISMOYO/AFP)
Updated 02 September 2018

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

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 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.
“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.
“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.”
The huge endeavour 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.
But 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 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” program.
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 coming out of China it’s sinister and a trap,” she said.
Stevenson-Yang said China’s loans are quoted in dollar terms, “but in reality they’re lending in terms of tractors, shipments of coal, engineering services and things like that, and they ask for repayment in hard currency.”
Standard & Poor’s said Beijing structures the infrastructure projects as long-term concessions, with a Chinese firm operating the facility for a period of 20 to 30 years while splitting the proceeds with the local counterpart or government.
The head of the International Monetary Fund, Christine Lagarde, raised concerns about potential debt problems in April and advocated greater transparency.
“It’s not a free lunch, it’s something where everybody chips in,” she said.


EU weighs options as Turkey stand-off grinds on

Updated 04 December 2020

EU weighs options as Turkey stand-off grinds on

  • Next week’s EU summit will be held in Brussels with leaders meeting face-to-face
  • Turkey and Greece countries are NATO members and the alliance has set up a “de-confliction mechanism”

BRUSSELS: European Council chief Charles Michel said Friday that Turkey has not de-escalated its stand-off with Greece and warned EU members now need to consider tougher options.
“I think that the cat and mouse game needs to end,” Michel said, referring to Turkey’s repeated incursions into Greek waters with gas exploration vessels.
“We will have a debate at the European summit on December 10 and we are ready to use the means at our disposal,” he added.
Next week’s EU summit will be held in Brussels with leaders meeting face-to-face after videoconferences were held as a coronavirus prevention measure.
One possibility, backed by some members, would be economic sanctions, but many states are not convinced.
EU foreign policy chief Josep Borrell told a conference in Italy “the EU Council will have to take the decision that only the EU can take, because the sanctions regime, it’s a matter for the member states.”
“There are not very many positive signals that came from Turkey during these months — in Cyprus and on the drilling, the talks between Greece and Turkey have not been developing,” he said.
Turkey has been challenging Greece over maritime territory in the Eastern Mediterranean, repeatedly sending a gas exploration vessel into Greek waters.
Both countries are NATO members and the alliance has set up a “de-confliction mechanism” to help avoid accidental military clashes.
But a German-led diplomatic approach to Ankara has made little progress in resolving the underlying issues, and some EU members — notably France and Greece itself — are pushing for stronger action.
Other EU capitals are more cautious, some fearing an escalating stand-off could see Turkish president Recep Tayyip Erdogan’s government once again allow a wave of refugees to head for EU borders.
Michel, who will host the summit, expressed Europe’s frustration.
“In October, after a very dense and strategic high level exchange, we defined a very positive offer to Turkey, we extended our hands,” he told a news conference to mark his first year in office.
“But the condition to move in that area is that Turkey needs to stop unilateral provocations, hostile statements, and the non-respect of international principles and rules-based society.
“Well, since October, things have not been very positive,” Michel noted.
“Since that time, we’ve seen that there have been unilateral acts that have taken place, a hostile rhetoric has been expressed.”
Backed by Turkish navy frigates, the research vessel the Oruc Reis was first deployed in August and again in October to the waters off Kastellorizo island, in defiance of EU and US calls to stop.
It returned to port again in October, but may go back to the disputed zone while Ankara says that, with its long Mediterranean coastline, its claim to sovereign waters in the region is stronger than Greece’s, which is based on its ownership of tiny Kastellorizo.