Business & Economy

China revives Belt and Road amid geopolitical turbulence, debt controversy

By Jesus Centeno and Victor Escribano

Beijing/Shanghai, Oct 17 (EFE).- China inaugurates the third Belt and Road forum with the intention of seducing what it calls “the Global South” with multimillion-dollar promises of investments that have also received strong criticism for the risk of debt they entail.

Beijing arrives at the meeting with the economy sluggish and its relations with the West, especially with the United States, stagnant, but with the aspiration to show its rising influence in full strategic competition with Washington.

The project, in fact, has never been received with enthusiasm among developed countries: Italy, the only G7 country that joined, in 2018, expressed this year its intention to abandon it after saying its trade with China had not improved.

Although China still seeks to preserve dialogue and trade with the West, its efforts are directed toward developing countries, with whom, in the words of Vice President Han Zheng, “we breathe the same breath and share the same future.”

The Chinese alternative officially tries to build a “multipolar world” by building ports, railways or airports between Asia, Europe and Africa, with more than 3,000 cooperation projects and an investment of almost a trillion dollars. According to the critics, it has also generated enormous amounts of debt and, in some cases, the resentment of local populations.

For example, Kenyan Vice President Rigathi Gachagua said this week that President William Ruto would try to close an agreement of up to $1 billion, partly to restructure debt accumulated in infrastructure projects, among which is an important railway line between Nairobi and Mombasa that has not yet been expanded.

“(Ruto) will go to China because many of our roads are paralyzed by the growing debt to China. We cannot pay our suppliers and some of the roads are incomplete. The president will seek a deal to restructure our debt to China and obtain favorable terms,” Gachagua said.

Beijing usually claims it does not impose “political conditions” for its projects, although critics point out that this is reflected in the fact that thorny issues such as corruption, human rights or environmental impact are left aside.

“The routes have increased the debt burden in some countries and China knows that this has diminished its reputation. It has to restructure them, but it will not cancel them,” said researcher Christoph Nedopil, founder of the Green Finance and Development Center, which tracks the route’s spending.

The academic said China has taken advantage of “the lack of Western alternatives” and that, with the routes, “it has improved its ability to develop projects abroad.”

Critics also point to the so-called “debt trap,” whereby some countries with limited resources have been forced to sign up for expensive projects so that Beijing can take control of the assets offered as collateral.

This is what happened in Sri Lanka, where China had invested since 2007 with credits for road projects, power plants and ports and, dragged down by debt, had to cede the exploitation of the Hambantota port to Beijing for 99 years, an agreement that was has become a source of strong controversy in ancient Ceylon.

Nedopil believes that the challenge for Beijing is indeed to engage in debt write-downs abroad at a time when its domestic economic problems “have not yet been resolved.” EFE


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