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Chinese‘s massive “One Belt One Road” global infrastructure financing strategy is based on a “secret overseas development finance program” that has plagued dozens of poor countries with nearly $400 billion in “hidden debt”. by the way According to a study published Wednesday.
According to research by AidData, a Virginia-based research team, nearly 35% of more than 13,000 projects funded by Chinese government loans have involved “major implementation issues”, including corruption scandals, environmental hazards, labor abuses, and public protests. . College of William and Mary.
The United States and other democracies are seeking to offer alternative development financing mechanisms for low-income countries to counter China’s Belt and Road Initiative, which the communist government launched nearly a decade ago as a springboard for its rising global influence.
The initiative became the flagship program of Chinese President Xi Jinping. It is designed to win goodwill in countries in Southeast Asia, Europe, Africa and Latin America while generating construction projects and infrastructure to create new trade routes and export opportunities for Chinese firms. Participants include traditional Chinese trading partners such as Cambodia and Laos, and US allies such as Italy, Greece and Saudi Arabia. They work on projects such as roads and bridges, power plants, rail lines, fiber optic networks and port improvements.
U.S. officials have warned for years that the program often involves predatory loans designed to ensnare poorer countries so that China can then make political and natural resource concessions in exchange for debt relief.
Some critics have even accused China of using the Belt and Road Initiative as a cover for a decade-long strategy to lay the groundwork for overseas military bases. Beijing vehemently denies the accusations and claims it is the United States, not China, that has a regular history of militarizing foreign aid.
The AidData study offers rich new details on the dark aspects of China’s global development initiative. He says Belt and Road is often based on loans with heavy contingent liabilities. They are not disclosed to borrowing nations in Africa, Southeast Asia, and other corners of the world.
The study examined 13,427 Chinese-funded projects in 165 countries and a total of $843 billion in loans and grants in the years leading up to the Xi government’s public launch of the Belt and Road Initiative in 2013 and beyond. Most deals require borrowers to use Chinese materials and workers for projects and pledge key assets as collateral to repay loans.
The report said Beijing “contractedly obliges overseas borrowers to procure project inputs (such as steel and cement) from China” and “allows countries to secure and repay loans with the money they earn from natural resource exports to China.”
“Collateralization has become the cornerstone of China’s implementation of a high-risk, high-reward credit allocation strategy,” the report said. “To secure the energy and natural resources that the country lacks in sufficient quantity, and to maximize returns on investment in surplus dollars and euros, Chinese state-owned lenders have rapidly increased the provision of foreign currency loans to distressed resource-rich countries. from high levels of corruption.”
Regarding “hidden debt,” the study reveals that about 70% of China’s overseas loans are “directed to state-owned companies, state-owned banks, special-purpose vehicles, joint ventures and private sector institutions.” These debts “mostly do not appear on government balance sheets” in developing countries.
The study’s authors wrote that the approach “blurs the distinction between private and public debt and exposes major public financial management challenges,” and that China’s worldwide debt assets are also now “from research institutions, credit rating agencies, or intergovernmental organizations with pre-agreed oversight responsibilities.”
Ammar A. Malik, a senior research scientist at AidData and co-author of the “Banking on the Belt and Road” study, said the Chinese government’s “unwillingness to disclose detailed information on its overseas development finance portfolio has been low-objectively considering the costs and benefits of participating in the BRI.” income and middle-income countries to weigh in.”
“This has also made it difficult for bilateral aid agencies and multilateral development banks to determine how they can compete – or coordinate and cooperate – with China to address global concerns,” Malik said on AidData’s website.
Forty-two countries around the world currently have public debt exposure levels in excess of 10% of GDP, according to the study, which points to a potential increase in “buyer remorse” among developing countries that have embraced China worldwide. credit in recent years.
Washington Times reported On the spread of discontent over BRI loans in many countries including Malaysia, Pakistan, Maldives and Sri Lanka in 2018. Malaysian Prime Minister Mahathir Mohamad then said that his government had canceled more than $20 billion in previously approved Chinese-funded projects because “we don’t want a new version of colonialism”.
Belt and Road skeptics also point to the credit crunch of the program created in Sri Lanka. The government there came under pressure to sell control of the port of Hambantota to a Chinese state-owned company after it fell behind in $1.5 billion in BRI funding from Beijing.
But that hasn’t stopped the rapid expansion of the BRI under Mr. Xi since its official launch just seven years ago.
According to a Council on Foreign Relations survey earlier this year, “39 countries in sub-Saharan Africa, as well as 34 in Europe and Central Asia, 25 in East Asia and the Pacific, and 18 in Latin America and the Caribbean, participated in the initiative. , 17 in the Middle East and North Africa and six in South Asia. These 139 BRI members, including China, account for 40% of global GDP.”
“It remains to be seen whether ‘buyer’s remorse’ among BRI participating countries can undermine the long-term sustainability of China’s global infrastructure initiative,” the study said. “However, it is becoming increasingly clear that Beijing needs to address the concerns of host countries in order to maintain support for the BRI.
U.S. officials have struggled for years to build momentum behind lending attempts to counter the BRI. Some officials have argued that the emerging US-Japan-Australia-India “Quad” alignment of major democracies, aimed at countering communist China’s rise as a global power, should include a major new development financing mechanism.
The AidData study said the U.S. and its allies are “united” around a new “Build a Better World” or “B3W” infrastructure initiative that will be driven by “the principles of sustainable and transparent financing, good governance, and public sector mobilization of private sector and organisations.”
capital, consultation and partnership with local communities, and strict adherence to social and environmental safeguards.”
The study noted that the “B3W” initiative was announced in June by the “Group of Seven” countries – the USA, Canada, France, Germany, Italy, Japan and the United Kingdom.
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