CHINA’S BALLOONING DEBT TO CUT LENDING FOR BELT, ROAD INITIATIVE

President Xi Jinping may have splurged on his foreign policy project, the Belt and Road Initiative that covers 70 countries, but mounting domestic debt and resistance to Chinese lending in many countries that do not want to be part of China’s supply chain have put a damper on the initiative, Cissy Zhou wrote for the South China Morning Post (SCMP).

“China will further harmonize policies, rules and standards with [Belt and Road Initiative] partners, and deepen effective cooperation with them on infrastructure, industry, trade, science and technological innovation, public health and people-to-people exchanges,” Xi said in his keynote address to the Asia-Pacific Economic Cooperation (APEC) forum.

“And while China will by no means abandon funding projects, it may cut back on lending, both due to domestic needs and moves to make sure future lending is sustainable, analysts said,” Zhou wrote. There are no official figures on the total amount of loans to, and investment in, belt and road projects, but according to data provider Refinitiv, in the first quarter of 2020, the value of belt and road projects, including projects with Chinese involvement, exceeded $4 trillion for the first time. Among these, 1,590 projects – valued at $1.9 trillion – were belt and road projects, while 1,574 other projects with a combined value of $2.1 trillion were classified as projects with Chinese involvement.

The World Bank estimated last year that around $500 billion was invested in belt and road projects in 50 developing countries between 2013 and 2018. Of that amount, about $300 billion was estimated to have been financed via public and publicly guaranteed debt. Non-financial corporate debt in China rose to over 165 per cent of its gross domestic product (GDP) in the third quarter of 2020, from 150 per cent of GDP in the same quarter last year, according to a report released by the Institute of International Finance (IIF) last week.