BEIJING: (Web Desk) Chinese officials said on Wednesday that the government will further strengthen financial support for the country’s Belt and Road Initiative, which is driving the development of infrastructure projects on trade routes between Europe and Asia.
The announcement came as Beijing’s latest annual budget raised spending on foreign affairs to help boost the country’s international standing, but also as a new report warned of the Belt and Road’s impact on the debt levels of developing countries.
Deputy Finance Minister Shi Yaobin told reporters in Beijing on the sidelines of the National People’s Congress session that the government will foster diversified financing channels for Belt and Road projects. “We will further consolidate the achievements we have made in terms of financial intermediation,” he said.
Bilateral currency swap agreements worth 1.4 trillion yuan ($224 billion) have been signed with the central banks of 24 participating governments over the first five years of the initiative, according to a government report issued this week.
Chinese authorities recently allowed local and foreign companies as well as foreign government agencies to issue “Belt and Road” bonds through the Shanghai and Shenzhen stock exchanges. The China Securities Regulatory Commission said on March 2 that it had approved applications from seven domestic and foreign companies to issue a combined 50 billion yuan in such bonds, according to state news agency Xinhua.
Shi said that Belt and Road financing will be long term and stable while adhering to risk controls. He said that Beijing is setting up an international Belt and Road financing center without divulging details. Officials said that Beijing will also promote development of free trade areas that include Belt and Road countries. “We wish to open up trade and reduce tariffs with countries along the Belt and Road,” Shi said.
In the government report, Beijing said it had signed more than 100 deals with 86 countries and organizations under the initiative. These have led to the construction of railways, ports, and oil and gas pipelines. These include a new Mombasa-Nairobi railway line in Kenya and rail projects underway connecting Hungary and Serbia, China with Laos and Thailand, and the Indonesian cities of Jakarta and Bandung.
In his address to the National People’s Congress on Monday, Premier Li Keqiang promised that China will play a greater role in global affairs. The government has budgeted 60.1 billion yuan for foreign affairs this year, 15.6% more than in 2017.
But China’s international ties, especially in regard to the financing of Belt and Road projects, has also raised concerns. The Center for Global Development, a U.S.-based think tank, said in a study published on Monday that Belt and Road-linked lending had created debt sustainability problems in eight countries — Djibouti, Laos, Kyrgyzstan, the Maldives, Mongolia, Montenegro, Pakistan and Tajikistan — while adding that “the majority of BRI countries will likely avoid problems of debt distress due to BRI projects.”
“China’s track record managing debt distress has been problematic,” the report said. “Unlike the world’s other leading government creditors, China has not signed on to well-established rules of the road when it comes to avoiding unsustainable lending and addressing debt problems when they arise.”