{"id":71351,"date":"2020-12-20T15:41:16","date_gmt":"2020-12-20T20:41:16","guid":{"rendered":"http:\/\/dbsjeyaraj.com\/dbsj\/?p=71351"},"modified":"2020-12-20T15:42:24","modified_gmt":"2020-12-20T20:42:24","slug":"china-rethinking-xis-project-of-the-century-chinese-overseas-lending-has-fallen-sharply-leading-to-a-reassessment-of-the-belt-and-road-initiative","status":"publish","type":"post","link":"https:\/\/dbsjeyaraj.com\/dbsj\/?p=71351","title":{"rendered":"China Re – thinking Xi\u2019s \u2018project of the century\u2019; Chinese overseas lending has fallen sharply leading to a reassessment of the Belt and Road Initiative"},"content":{"rendered":"


\n by James Kynge in Hong Kong and Jonathan Wheatley in London<\/strong><\/p>\n

It has not taken long for the wheels to come off the Belt and Road Initiative. As recently as May 2017, China\u2019s leader Xi Jinping stood in Beijing before a hall of nearly 30 heads of state and delegates from over 130 countries and proclaimed \u201ca project of the century\u201d.<\/p>\n

This was not hyperbole. China has promised to spend about $1tn on building infrastructure in mainly developing countries around the world \u2014 and finance almost all of this through its own financial institutions. Adjusted for inflation, this total was roughly seven times what the US spent through the Marshall Plan to rebuild Europe after the second world war, according to Jonathan Hillman, author of The Emperor\u2019s New Road.<\/p>\n

But according to data published this week, reality is deviating sharply from Mr Xi\u2019s script. What was conceived as the world\u2019s biggest development programme is unravelling into what could become China\u2019s first overseas debt crisis.<\/p>\n

<\/p>\n

Lending by the Chinese financial institutions that drive the Belt and Road, along with bilateral support to governments, has fallen off a cliff, and Beijing finds itself mired in debt renegotiations with a host of countries.<\/p>\n

\u201cThis is all part of China\u2019s education as a rising power,\u201d says Mr Hillman, a senior fellow at Washington-based think-tank CSIS. \u201cIt has taken a flawed model that appeared to work at home, building large infrastructure projects, and hubristically tried to apply that abroad.\u201d<\/p>\n

Chinese president Xi Jinping, centre, and other leaders at the Belt and Road Forum on Yanqi Lake in 2017. China\u2019s current rethink betrays a tacit recognition that its overseas lending bonanza has been ill-conceived
\n\u201cHistorically, most infrastructure booms have gone bust,\u201d he adds. \u201cWhether China can avert that fate may depend on its ability to renegotiate loans with countries now in urgent need of debt relief. If China is unable or unwilling to provide sufficient relief to its borrowers, it could find itself at the centre of a debt crisis in developing markets.\u201d<\/p>\n

The data that describes China\u2019s predicament comes from researchers at Boston University who maintain an independent database on China\u2019s overseas development finance. They found that lending by the China Development Bank and the Export-Import Bank of China collapsed from a peak of $75bn in 2016 to just $4bn last year.<\/p>\n

The context around this is crucial. The two banks fall under the direct control of China\u2019s state council (cabinet), so they function as arms of the state. They provide the overwhelming majority of China\u2019s overseas development lending and the funds they disburse rival in scale those of the World Bank, the world\u2019s largest multilateral lender.<\/p>\n

A construction worker in Sihanoukville, Cambodia. Debt renegotiations have proliferated as the pandemic has clobbered emerging economies
\nBetween 2008 and 2019, the two Chinese banks lent $462bn, just short of the $467bn extended by the World Bank, according to the Boston University data.<\/p>\n

In some years, lending by the Chinese policy banks was almost equivalent to that by all six of the world\u2019s multilateral financial institutions \u2014 which along with the World Bank include the Asian Development Bank, the Inter-American Development Bank, the European Investment Bank, the European Bank for Reconstruction and Development and the African Development Bank \u2014 put together.<\/p>\n

In global development finance, such a sharp scaling back of lending by the Chinese banks amounts to an earthquake. If it persists, it will exacerbate an infrastructure funding gap that in Asia alone already amounts to $907bn a year, according to Asian Development Bank estimates. In Africa and Latin America \u2014 where Chinese credit has also formed a big part of infrastructure financing \u2014 the gap between what is required and what is available is also expected to yawn wider.<\/p>\n

\u2018Dual circulation\u2019<\/strong><\/p>\n

China\u2019s retreat from overseas development finance derives from structural policy shifts, according to Chinese analysts. \u201cChina is consolidating, absorbing and digesting the investments made in the past,\u201d says Wang Huiyao, an adviser to China\u2019s state council and president of the Center for China and Globalisation, a think-tank.<\/p>\n

Luang Prabang railway bridge in Laos Railway, which was built by the China Railway Group. China has promised to spend about $1tn on building infrastructure in mainly developing countries around the world
\nChen Zhiwu, a professor of finance at Hong Kong university, says the retrenchment in Chinese banks\u2019 overseas lending is part of a bigger picture of China cutting back on outbound investments and focusing more resources domestically. It is also a response to tensions between the US and China during the presidency of Donald Trump, when Washington used criticisms of the Belt and Road as a justification to contain China, Prof Chen adds.<\/p>\n

\u201cIn domestic Chinese media, the frequency of the [Belt and Road] topic occurring has come down a lot in the last few years, partly to downplay China\u2019s overseas expansion ambitions,\u201d says Prof Chen, who is also director of the Asia Global Institute think-tank. \u201cI expect this retrenchment to continue.\u201d<\/p>\n

Courtesy;Financial Times<\/em><\/p>\n

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by James Kynge in Hong Kong and Jonathan Wheatley in London It has not taken long for the wheels to come off the Belt and Road Initiative. As recently as May 2017, China\u2019s leader Xi Jinping stood in Beijing before a hall of nearly 30 heads of state and delegates from over 130 countries and …<\/p>\n

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