It was billed as the “project of the century.” But China’s massive Belt and Road Initiative is now mired in debt and heading into uncharted territory.
The Covid-19 pandemic, geopolitical tension and rampant global inflation have turned President Xi Jinping’s US$1 trillion dream program into a nightmare for struggling nations in Africa and Asia.
Like most things in the world’s second-largest economy, secrecy shrouds the “conditions” for borrowing states. Bankrupt Sri Lanka is a case in point. So, is crisis-torn Zambia.
Lusaka has even asked for more than $8 billion to be wiped off its debts to Chinese lenders, private bondholders and other creditors in a major restructuring plan.
“We’ve seen the consequences when international infrastructure deals are corrupt and coercive when they’re poorly built or environmentally destructive when they import or abuse workers, or burden countries with crushing debts,” US Secretary of State Antony Blinken said last month in an apparent reference to Chinese-funded projects.
Road to debt:
- The B&R Initiative is the jewel in the crown of President Xi’s foreign policy.
- These New Silk Roads include a maze of multi-billion-dollar infrastructure projects and digital links.
- They involve at least 140 nations and five billion people across the globe.
- They also account for 3,000 projects worldwide, China’s Ministry of Foreign Affairs stated last month.
- Yet many of the countries that joined the B&R “family” are now struggling to pay off the interest on loans.
Delve deeper: An overriding concern has been the lack of transparency. AidData, an international development research laboratory at The College of William & Mary in the United States, highlighted “hidden debt” totaling a whopping $385 billion in crucial projects.
Between the lines: “China has quickly established itself as the financier of first resort for many low-income and middle-income countries, but its international lending and grant-giving activities remain shrouded in secrecy,” Ammar A Malik, a senior researcher at AidData, said.
Big picture: As the International Monetary Fund and World Bank scramble to prop up nations struggling to survive, China is facing its “first overseas debt crisis.”
Grandiose vision: “Only five years ago, China’s leader Xi Jinping proclaimed that the Belt and Road Initiative was the ‘project of the century,’” a Financial Times editorial said.
Financial firefighting: “Now the huge program to build often worthwhile infrastructure in developing countries is morphing into a financial firefighting operation on a grand scale,” the London-based newspaper added.
China Factor comment: The B&R Initiative has been vital for the country’s sprawling state-owned enterprises and has taken up the slack for the under-fire steel sector. But at the same time, it has created gigantic debt mountains that threaten to bury countries across the globe.