China is now suggesting a shift in it’s BRI approach amid debt concerns. Discuss the issue with valid reasons.
China has hinted at a shift in how it will pursue its signature Belt and Road Initiative (BRI) amid growing concerns about debt repayments from many partner countries because of the COVID-19 pandemic.
It plans to focus on quality in the joint pursuit of the BRI.
The BRI was written into the Communist Party of China’s Constitution in 2017, underlining its special status.
The report in 2018 did not mention quality, merely saying China will promote the joint pursuit of the BRI.
It also mentioned then China would seek to advance infrastructure connectivity, which was omitted this year.
This year China has said that it would focus on “achieving shared growth through consultation and collaboration” and would work with BRI partners for mutually beneficial outcomes.
In recent weeks, China has faced calls from countries in Asia and Africa to delay or waive debt repayments.
What China could do to help these nations is to bring projects funded by loans back to life and realise sustainable profits, instead of measures as simple as offering write-offs.
China is open to talk with debtors on the basis of equality and mutual benefit.
China’s financial assistance included grants, interest-free loans and preferential loans. Interest-free loans which are offered by the Chinese government are applicable for debt relief.
The preferential loans are not applicable for debt relief and are more complex with regards to any difficult debt problems.
If any debtors encounter difficulties to pay on time, there may be tailored plans including rescheduling or China increasing funding to help related projects resume operation and return profits.
According to AidData, a research lab, China’s grants and loans totalled $354.4 billion between 2000 and 2014, of which 23% was grants while the rest were commercial loans at market or close-to-market rates.
The world’s debt to China grew 10 times between 2000 and 2017, with developing countries owing $380 billion to China.