China explains B&R debt risks

China aims to make the Belt and Road (B&R) initiative sustainable and prevent debt risks, its finance minister said on Thursday, seeking to allay criticism that the infrastructure plan to boost trade and investment creates a heavy burden for some nations.

The policy championed by Chinese President Xi Jinping has become mired in controversy, with some partner nations bemoaning the high cost of projects, though China has repeatedly said it is not seeking to trap anyone with debt.

Western governments have tended to view it as a means to spread Chinese influence abroad, saddling poor countries with unsustainable debt.

Finance minister Liu Kun, speaking at a forum to kick off a three-day Belt and Road summit in Beijing, said China would establish an analysis framework on debt sustainability for Belt and Road projects to “prevent and resolve debt risks”.

Chinese financial institutions, countries involved in Belt and Road and international agencies are encouraged to use this framework to enhance debt management, Liu said.

While most of the Belt and Road projects are continuing as planned, some have been caught up by changes in government in countries such as Malaysia and the Maldives. Those that have been shelved for financial reasons include a power plant in Pakistan and an airport in Sierra Leone, and Beijing has in recent months had to rebuff critics by saying that not one country has been burdened with so-called “debt traps”.

Yi Gang, China’s central bank governor, said at the same event that local currencies will be used for investments related to the Belt and Road plan to curb exchange rate risks.

China will follow market principles and rely on commercial funds for Belt and Road financing, Yi said, adding that China will improve transparency for those projects.

Reuters