China is making it clear that it will honour the Group of 20’s debt-suspension scheme it endorsed last year, but Beijing is reluctant to respond to Western suggestions about debt restructuring for struggling developing nations.
While promising a “bigger contribution” in helping poor countries achieve financial sustainability, vice-minister of commerce Qian Keming said that China will focus on infrastructure projects that can generate returns for participating countries.
“We definitely didn’t force them to repay [maturing] debts. Instead, we did lots of work on adjusting their [loan] portfolios and repayment periods,” he said on Monday at a panel discussion on the financing of belt and road infrastructure.
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China is a major source of funding for infrastructure developments via its Belt and Road Initiative. President Xi Jinping unveiled the grand infrastructure connectivity plan in 2013 that now connects more than 60 countries across Asia, Europe and Africa.
But the initiative has been either framed by Western countries as China’s Marshall Plan to project its political and economic influence, or described as a means of debt-trap diplomacy that keeps a tight grip on participating nations.
“If [a developing country’s] debts are restructured, their international financing could become more costly and difficult following the [downgrading of their] sovereign rating. How can they build new infrastructure? Will they still be eager for [economic] development,” Qian asked at Monday’s Boao Forum for Asia, a key platform for China to communicate its policies with international political and business leaders.
The G20, comprising the world’s 20 largest economies, launched the Debt Service Suspension Initiative in May to help coronavirus-hit developing countries. A total of 45 countries have signed up, and the deferral amount totals US$5.7 billion. Earlier this month, the G20 said the debt-payment freeze will be extended until the end of this year.
China has deferred debt repayments worth US$1.3 billion for 23 countries. It is the largest total among the participating G20 nations.
The world’s second-largest economy has invested US$136 billion in belt and road regions over the past eight years, according to the Ministry of Commerce. China’s non-financial outbound direct investment in belt and road countries rose 18.3 per cent year on year to US$17.8 billion in 2020, accounting for 16.2 per cent of the country’s total outbound investment, despite the coronavirus pandemic.
Qian said that some developing countries have long faced debt issues, and the key to the financial dilemma is to promote their development. “We hope those [belt and road] projects can generate cash flow to help increase the fiscal and foreign exchange revenue of host countries,” he added.
Zhou Xiaochuan, former governor of the People’s Bank of China who is now deputy director general of the Boao Forum, said allegations regarding China’s intentions and motivations were “politically driven”.
[Some countries] tend to attribute all of those [belt and road] projects to a government plot
Zhou Xiaochuan, Boao Forum
“Conspiracy theories thrive in some countries. They tend to attribute all of those projects to a [Chinese] government plot,” he said. “I hope that the relevant authorities can release statistics to prove that many [belt and road] projects are market-oriented, commercially feasible and derive from actual demand.”
Hu Xiaolian, chairwoman of the Export and Import Bank of China, a major capital provider of overseas Chinese projects, said the nation’s push for sustainable finance is different than financial aid.
“Debt suspension is just meant to ease the repayment pressure during the special period,” she said at the same panel. “It is not a reduction nor exemption. It shouldn’t be used to provoke relations between China and developing countries, nor to hurt Chinese interests.”
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