Virus slows China’s Asia projects

Some Chinese workers in Colombo have not returned after the holidays. (AFP)
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Updated 29 February 2020

Virus slows China’s Asia projects

COLOMBO: From an artificial island in Sri Lanka to a bridge in Bangladesh and hydropower projects in Nepal and Indonesia, China’s trillion-dollar Belt and Road plan is stuttering under the effects of the deadly coronavirus.

The outbreak that emerged in China in late December and spread to dozens of countries has cut off the Chinese labor supplies and equipment imports needed to keep major infrastructure projects running.

More than 133 countries have imposed entry restrictions on Chinese citizens or people who have visited China to prevent the spread of the disease, data from China’s National Immigration Agency showed.

China itself has imposed quarantines and travel curbs across the country to contain an epidemic that has killed more than 2,700 and infected around 79,000.

Sri Lanka requires 14-day quarantine for people arriving from China, and insists projects ensure Chinese staff are restricted to construction sites and their dorms.

At Colombo’s Port City — an artificial island the size of central London that is to house one of South Asia’s biggest financial centers — work was progressing at a snail’s pace as nearly a third of the Chinese workers who left for the Lunar New Year holidays have not returned.

The March opening of South Asia’s tallest free-standing communications tower — built with Chinese state funding in the heart of Colombo — has also been delayed by two months.

“Major construction projects in Sri Lanka that are funded by China mostly employ Chinese construction workers and they have hit a snag,” Nissanka Wijeratne, secretary of the Sri Lanka Chamber of Construction Industries, told AFP.

At the Port City project, the cafeteria for Chinese workers was half-empty recently.

“Most of our Chinese colleagues want to return, but the local staff are afraid to work with them,” said a Chinese foreman who only offered his surname, Xia. “Work is slow and it isn’t clear when things would return to normal.”

Temperatures of all workers at the site are taken several times a day and masks and hand sanitisers have been distributed.

Two top Chinese decision-makers at the Port City project who returned to prevent work from coming to a stop were quarantined at a five-star hotel, said project manager Bimal Gonaduwage.

“At the beginning there was a lot of panic among local workers, but now things have subsided,” Gonaduwage said.

A small pharmacy near the Port city project was doing a brisk sale in an “ayurvedic-amulet” used to “ward off infections.”

The red strings with a ball of crushed wild turmeric coated in Asafetida powder tied to its center are mostly bought by workers at “China projects,” the pharmacist Anjana Paramesh said.

The regulator of Chinese state-owned companies last week said the outbreak had caused “difficulties” for some overseas investments.

Some Chinese state-owned enterprises were “isolating the personnel to be dispatched (overseas) for 14 days in China and then another 14 days upon their arrival in the host countries before they begin work,” said Peng Huagang, secretary general of the state-owned Assets Supervision and Administration Commission.

Bangladesh has stopped issuing visas to Chinese visitors, including Chinese workers.

The China-funded $2.5 billion Bangladesh China Power Company at the port of Payra employs 3,000 Chinese workers.

Nearly two-thirds of them had returned to China during the Lunar New Year in January, said project manager Abdul Moula: “Our plan is to start full-scale operation by next month. But if at least 300 Chinese workers don’t come back by this month ... power production could be delayed.”

At the $3.5 billion Padma Multipurpose Bridge, being built by state-owned China Major Railway Bridge Company, nearly one-third of the 980 Chinese workers have yet to return, said project manager Dewan Abdul Kader.

On Indonesia’s Sumatra island, work at the China-backed Batang Toru hydropower plant has ground to a halt due to a lack of Chinese workers, after Indonesia halted all flights to and from mainland China.

In Nepal — home to more than a dozen Chinese-backed hydropower projects — many Chinese workers who left on holiday have also not returned.

“In their absence, projects are being delayed or slowed down,” said Vishnu Bahadur Singh from the Nepal Hydropower Association.

The setback from the coronavirus comes after a pushback against Belt and Road projects in several countries including Sri Lanka, Malaysia and Indonesia, where contracts were renegotiated to cut costs or ensure better environmental compliance.

But Chinese Foreign Minister Wang Yi last week denied that disruption from the virus could slow work on China-backed investments in Asia, saying it “won’t have any negative impacts.”


S&P cuts Australia’s sovereign outlook, affirms AAA rating

Updated 08 April 2020

S&P cuts Australia’s sovereign outlook, affirms AAA rating

  • S&P affirmed Australia’s prized rating but said a downgrade was possible within the next two years
  • Australian long-dated bonds sold off after S&P’s outlook downgrade

SYDNEY: Global ratings agency S&P on Wednesday lowered its outlook on Australia’s coveted ‘AAA’ rating to “negative” from “stable” in anticipation of a “material” weakening in the government’s debt position as it splashes out a large fiscal stimulus package.
S&P affirmed Australia’s prized rating but said a downgrade was possible within the next two years if the economic damage from the COVID-19 outbreak is more severe or prolonged than it currently expects.
Australia is among a handful of countries in the world to boast the best ranking from all three major ratings agencies.
But it has come under a cloud as the pandemic has dealt Australia a severe economic and fiscal shock, with S&P predicting the A$2 trillion ($1.23 trillion) economy would plunge into recession for the first time in nearly 30 years.
This would cause a “substantial deterioration of the government’s fiscal headroom at the ‘AAA’ rating level,” S&P said in a statement.
Treasurer Josh Frydenberg said the outlook downgrade was “a reminder of the importance of maintaining our commitment to medium term fiscal sustainability.”
The government has pledged A$320 billion ($197.73 billion) in fiscal spending, or 16.4 percent of annual economic output, to backstop the economy and prevent a crisis as the pandemic shuts companies and leaves many unemployed.
Some fund managers said Wednesday’s outlook downgrade was unlikely to raise the government’s borrowing costs by much though it could hurt Australian companies whose ratings are dependent on the sovereign rating.
“A large proportion of credit funds are mandated to maintain funds in a specific ratings bucket,” said Asmita Kulkarni, Director Investment Strategy at FIIG.
“With potential widespread downgrades we could see funds being forced to sell-down investment which would result in a widening of credit spreads.”
Australian long-dated bonds sold off after S&P’s outlook downgrade with 10-year yields jumping to 0.967 percent from 0.909 percent at Tuesday’s close.
Economists said they do not expect a rating downgrade prior to the federal budget due on Oct. 6.
It was only in September 2018 that S&P upgraded Australia’s outlook to “stable” from “negative” as the budget came close to balance. The government had even projected a surplus for the current fiscal year and next.
While all those predictions are now under water, Australia’s public debt is still in good shape, S&P noted.
“While fiscal stimulus measures will soften the blow presented by the COVID-19 outbreak and weigh heavily on public finances in the immediate future, they won’t structurally weaken Australia’s fiscal position,” S&P said.
“This expected improvement is a key supporting factor of our ‘AAA’ rating.”