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CGD in the News

August 14, 2018

How Debt Traps From China’s Belt and Road Initiative Could Upend the IMF (World Politics Review)

By Daniel McDowell 

No stranger to political controversy, the International Monetary Fund may soon find itself embroiled in one that pits China’s interests against those of the United States. Beijing’s hugely ambitious international development project, known as the Belt and Road Initiative, is raising fears of debt crises in the developing world, and the IMF may be called in to clean up the mess. 

The U.S. is poised to oppose any IMF deal providing funds that would ultimately go to pay off Belt and Road-related tabs. How the IMF handles this situation could give clues about how the institution will deal with competing American and Chinese interests in an increasingly multipolar world. 

... 

Sri Lanka is not alone in its struggles. Earlier this year, a troubling report from the Center for Global Development identified eight countries where Chinese financing of Belt and Road projects will “significantly add to the risk of debt distress.” Of these eight countries, two—Sri Lanka and Mongolia—are currently under an IMF assistance program, and one—Pakistan—is reportedly mulling a request for economic aid from the IMF. Over the next several years, more countries could follow, and this could put the fund in a tricky spot. 

Read the full article here.

August 14, 2018

‘Debt colonialism’ accusations on B&R ring false (Global Times)

By Wu Dongxu 

In recent years, there has been an avalanche of negative reports about the Belt and Road (B&R) initiative, many of which are focused on the debt implications for countries involved. Some Western and Indian politicians and commentators have begun using the term "debt colonialism" to describe China's lending practices in Africa. However, the debt issue should be viewed objectively, rather than through a political agenda. 

Trade between two free parties must be mutually beneficial. Otherwise, one or both parties would not enter into the agreement. There are no reports of China forcing countries to take loans. Quite the opposite, African leaders have praised China's B&R initiative as a tremendous opportunity. The former Ethiopian prime minister Hailemariam Desalegn said the B&R falls perfectly in line with Africa's vision to achieve industrialization and sustainable development. Uganda hailed the initiative as empowering and liberating. Even the IMF has supported the B&R initiative, with the opening of the China-IMF Capacity Development Center. The countries taking the loans believe they will benefit from them.  

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China only owns a small proportion of total African debt. According to the Center for Global Development, private creditors - not the Paris Club or China - hold much of Africa's debt. According to S&P, roughly $325 billion of sub-Saharan Africa's total $450 billion in debt is private.

Read the full article here.

August 11, 2018

US senators seek to block IMF bailouts for China’s allies (The News)

By TheNews.com

WASHINGTON: A cross-party group of 16 US senators has urged the Trump administration to block the International Monetary Fund (IMF) from bailing out the countries that have obtained loans from China under its infrastructure development plan.

The letter to Secretary of State Michael Pompeo and Treasury Secretary Steve Mnuchin mentions Pakistan, Sri Lanka and Djibouti among the countries that have accepted billions of dollars in loans from China but are unable to repay. 

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It said the Centre for Global Development has estimated that of the 68 countries currently hosting BRI funding protects, 23 are at risk of debt distress, and in eight of those countries, future BRI-related financing raises serious concerns about sovereign debt sustainability. 

Read the full article here.

August 10, 2018

China's Debt-Trap Diplomacy Along the Belt and Road (The Wire)

By Amar Diwakar 

In a short span of time, China has taken the lead in establishing an impressive array of international financial institutions to fuel its Belt and Road Initiative (BRI) – President Xi Jinping’s signature $8 trillion infrastructure investment plan spanning Asia, Europe and Africa. These include the Asian Infrastructure Investment Bank, the Silk Road Fund, the New Development Bank, and the Contingent Reserve Arrangement

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study published in March by the Center for Global Development identified 23 countries involved in hosting BRI-funded projects that are at risk of debt distress, eight of which are assessed to be highly vulnerable. 

Read the full article here.

August 9, 2018

Kyrgyzstan’s north-south road to corruption (Open Democracy)

By Satina Aidar 

On 26 June 2018, the Fergana website published my investigation unveiling corruption schemes behind Kyrgyzstan’s biggest infrastructure project, an alternative 433km road linking the capital Bishkek in the North with the country’s main city in the South, Osh. The project has been funded with a 850 million USD loan from the Export-Import (Exim) Bank of China under the One Belt One Road Initiative, with the China Road and Bridge Corporation (CRBC) as the main implementing partner.

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As the Chinese state prepares to pour trillions of USD into infrastructure projects in Asia, Europe and Africa, a policy paper by the Washington-based Center for Global Development warns of the possible insolvency of borrower countries if current lending practices continue. Kyrgyzstan is listed along with seven other countries of “particular concern”. Obviously, the paper argues, the fear is that in the long term “(d)omestic spending on infrastructure and social services may be sacrificed in order to service the debt, with the problem compounded when governments borrow additional funds just to meet debt servicing needs.”  

Read the full article here.

 

August 8, 2018

Beware China’s loans to Manila (The Phnom Penh Post)

(Philippine Daily Inquirer/ANN): In order to finance its ambitious “Build, build, build” program, the Philippines would need the infusion of massive foreign loans. In the past, the country depended on the World Bank, the International Monetary Fund and other Western financial institutions. Now the main source of loans is China.

In his first visit to China in 2016, President Rodrigo Duterte signed a cooperation agreement with Chinese President Xi Jinping, with Beijing pledging to provide funding for 30 projects in the Philippines worth billions of dollars.

As part of the agreement, China has earmarked $82.4 million for the Chico River Dam Project. Beijing has also pledged to fund two Philippine railway projects with a combined cost of $8.3 billion, and 30 smaller projects valued at $3.7 billion.

While Chinese loans appear to be attractive, they are not, in reality, that benevolent, and could be harmful to the country in the long term. 

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According to the Washington-based Center for Global Development (CGD), a nonprofit research organisation, nations participating in the current Belt and Road investment plan that will default in their loan repayments will eventually find themselves at the mercy of Beijing. It said eight nations are now vulnerable to above-average debt: Djibouti, Kyrgyzstan, Laos, the Maldives, Mongolia, Montenegro, Pakistan and Tajikistan. 

Read the full article here.

August 7, 2018

Philippines must beware those loans from China (The Nation)

By Alito L. Malinao 

In his first visit to China in October 2016, President Duterte signed a cooperation agreement with Chinese President Xi Jinping, with Beijing pledging to provide funding for 30 projects in the Philippines worth billions of dollars.

As part of this agreement, China has earmarked 4.37 billion pesos (Bt2.75 billion) for the Chico River Dam project, the groundbreaking of which was held last June 8. The project is funded by China Exim Bank and implemented by China CAMC Engineering Co Ltd.

Beijing has also pledged to fund two Philippine railway projects with a combined cost of $8.3 billion (Bt276 billion), and 30 smaller projects valued at $3.7 billion.

While Chinese loans appear to be attractive, they are not, in reality, that benevolent, and could be harmful to the country in the long term.

...

According to the Washington-based Centre for Global Development (CGD), a nonprofit research organisation, nations participating in the current Belt and Road investment plan that will default in their loan repayments will eventually find themselves at the mercy of Beijing. It said eight nations are now vulnerable to above-average debt: Djibouti, Kyrgyzstan, Laos, the Maldives, Mongolia, Montenegro, Pakistan and Tajikistan. 

Read the full article here.

August 5, 2018

Senators Signal Concerns Over China's Global Investments (Wall Street Journal)

By Siobhan Hughes and Josh Zumbrun

Several US senators have raised concerns over China’s investments in several countries, including in Sri Lanka.

According to the Wall Street Journal, the US senators are pressing the Trump administration to detail what it is doing to deal with Beijing’s financing of international infrastructure projects that have left many countries indebted to China and potentially in need of bailouts.

In a letter to Treasury Secretary Steven Mnuchin and Secretary of State Mike Pompeo, the senators asked officials how they will push the International Monetary Fund to address problems arising from China’s global investment plan, the “Belt and Road Initiative.” 

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In March, the Center for Global Development, an internationally-focused think tank in Washington, estimated that the program had left eight countries financially vulnerable because of the large amount of borrowing they’d done for China’s projects. While the scale of the Belt and Road Initiative is considered a modest part of Chinese lending, the sums are enormous from the perspective of some of the smaller countries that are undertaking large projects.

Read the full article here.

 

August 5, 2018

Senators Signal Concerns Over China's Global Investments (Wall Street Journal)

By Siobhan Hughes and Josh Zumbrun

Several US senators have raised concerns over China’s investments in several countries, including in Sri Lanka.

According to the Wall Street Journal, the US senators are pressing the Trump administration to detail what it is doing to deal with Beijing’s financing of international infrastructure projects that have left many countries indebted to China and potentially in need of bailouts.

... 

In March, the Center for Global Development, an internationally-focused think tank in Washington, estimated that the program had left eight countries financially vulnerable because of the large amount of borrowing they’d done for China’s projects. While the scale of the Belt and Road Initiative is considered a modest part of Chinese lending, the sums are enormous from the perspective of some of the smaller countries that are undertaking large projects. 

Read the full article here.

August 1, 2018

Australia and Japan Join US Indo-Pacific Economic Strategy Amid China’s Growing Investment (The Epoch Times)

By Janita Kan

Australia and Japan are teaming up with the United States to boost investment in Indo-Pacific infrastructure projects in a move that is seen to be countering China’s increasing influence in the region.

In a joint statement on July 31, the nations announced a trilateral partnership to invest in regional projects that would “build infrastructure, address development challenges, increase connectivity, and promote economic growth.” 

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According to a report published by the U.S.-based think tank Center for Global Development in March this year, several countries participating in the BRI are seen to be at great risk of going bankrupt as a result of future financing related to BRI projects. 

Read the full article here.

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