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China defends BRI, vows to battle debt

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A Chinese labourer stands at the construction site of the Chinese-funded Port City on reclaimed land in Colombo, Sri Lanka. ISHARA S KODIKARA/AFP

China defends BRI, vows to battle debt

CHINA launched on Thursday a staunch defence of its Belt and Road Initiative (BRI) global infrastructure project as it opened a summit with a pledge to ease concerns about debt linked to its signature foreign policy.

President Xi Jinping’s pet project is a reboot of the ancient Silk Road to connect Asia to Europe and Africa through massive investments in maritime, road and rail projects.

The initiative offers to bring much-needed modern infrastructure to developing countries, but the US has dubbed it a “vanity project” and critics warn it is a “debt trap” favouring Chinese companies.

Huang Kunming, a member of China’s powerful Politburo, said at the opening of the three-day Belt and Road Forum in Beijing that there have been “some misunderstandings and unfounded rumours” about BRI that they hope to clear up.

But in a nod to the concerns over loans, Finance Minister Liu Kun said China would release a framework to “prevent debt risks”, according to state-owned China Securities Journal.

The “debt sustainability analysis framework” encourages Chinese financial institutions and BRI countries to voluntarily improve debt management levels, the report said.

China must properly address “issues of environmental protection and debt management that the international community pays close attention to”, said China Development Bank governor Zheng Zhijie.

The state policy bank has doled out much of the Belt and Road-related loans since 2013, with Zheng saying it had extended $190 billion in financing to 600 projects.

Debt trouble

International Monetary Fund chief Christine Lagarde said Liu’s announcement and China’s increased focus on the long-term success of BRI projects were “very welcome steps in the right direction”.

Lagarde told the forum that “sound financial regulation, transparent rules for investment, and attention to fiscal sustainability” were needed to successfully open capital markets, according to her prepared remarks.

Leaders from 37 countries have begun to arrive in Beijing for the three-day forum, with officials from scores of other nations in attendance.

Russian President Vladimir Putin and Italian Prime Minister Giuseppe Conte, whose country became the first G7 member to sign up to Belt and Road, are among the headliners.

But EU powers Germany and France are sending ministers instead, while the US has not dispatched any officials from Washington.

“We call upon all countries to ensure that their economic diplomacy initiatives adhere to internationally-accepted norms and standards, promote sustainable, inclusive development, and advance good governance and strong economic institutions,” a US embassy spokesperson said.

Since Xi launched Belt and Road in 2013, China has invested $90 billion in projects while banks have provided between $200 billion and $300 billion in loans, according to Chinese officials.

But examples of debt trouble abound.

Sri Lanka turned over a deep-sea port to China for 99 years after it was unable to repay loans. Pakistan needs an international bailout.

And Montenegro has had to make difficult choices after taking on crushing Chinese debt to pay a Chinese company to build a new highway.

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