China’s Belt and Road Initiative needs upgrades to help heavily indebted partners, Standard Chartered says
- Belt and road projects need to be commercially viable, which is doable with better transparency and debt management
Debt relief by China can prevent financial crises in developing nations included in Beijing’s “Belt and Road Initiative”, but greater project transparency and better debt management are needed to boost the ambitious programme’s sustainability, according to Standard Chartered.
“China’s ability, and apparent willingness, to provide bilateral debt relief suggests a low risk of systemic debt fallout,” said Kelvin Lau Kin-heng, the Greater China senior economist at the bank, which derived about 41 per cent of its pre-tax underlying profit from Southeast and South Asia, the Middle East and Africa – the key markets of the initiative – in the year’s first half.
“However, we believe a more transparent BRI development framework and improved debt management are more sustainable ways to promote the BRI going forward ... Debt relief is inadequate recourse if countries involved in the BRI do not ensure that a project is commercially viable.”
He said increased transparency, through establishing a comprehensive belt and road development framework, open and fair procurement and land requisition processes, disclosure of debt pricing and other contractual commitments, is key to enhancing projects’ commercial viability and the initiative’s sustainability.
President Xi Jinping initiated the ambitious project in 2013, with the aim of fostering closer trade and investment ties with 71 nations in Asia, Europe, Africa and Latin America, initially through mostly China-funded infrastructure projects.
Chinese banks have provided some US$200 billion of loans to fund more than 2,700 belt and road projects, according to its industrial policy setter, the National Development and Reform Commission.
