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China plays down fears of debt, political risk linked to Belt and Road

China's President Xi Jinping. (Alexei Nikolsky/Russian Presidential Press and Information Office/TASS/Abaca Press/TNS)
April 27, 2019

This article was originally published by Radio Free Asia and is reprinted with permission.

Chinese President Xi Jinping sought to allay fears that his country was exporting unsustainable levels of debt and authoritarian methods of government on Friday, promising that his global infrastructure andcooperation plan would be held to higher standards.

Xi told the Belt and Road Forum in Beijing that the ruling ChineseCommunist Party wants “open, green and clean cooperation” with “zerotolerance for corruption.”

The plan seeks to create new rail, road, port, and energy infrastructure linking China with Europe, Africa, and other parts of
Asia, at an estimated cost of around U.S.$1 trillion.

Xi avoided mentioning debt directly, as his government hopes to revivemomentum for the plan after a sharp fall in the number of new projects last year following tougher lending guidelines.

Critics have also said some of the projects risk opening the door to Chinese influence, in return for too little economic gain.

Malaysian Prime Minister Mahathir Mohamad recently suspended plans fora Chinese-built railway and other projects, citing high associated costs.

Thailand and Nepal have also canceled or scaled back Belt and Roadprojects, while Ethiopia and others have renegotiated debt repaymentsamid criticism that poorer countries risk being pushed into a debt trap by the plan.

Russian President Vladimir Putin praised the initiative on Friday, however, saying it fits well with the Russia-led Eurasian Economic Union trading bloc.

The United States hasn’t sent any officials from Washington.

“We call upon all countries to ensure that their economic diplomacyinitiatives adhere to internationally accepted norms and standards,promote sustainable, inclusive development, and advance good governance and strong economic institutions,” a U.S. Embassy spokesperson said.

China’s Ministry of Finance on Thursday issued “debt sustainability”guidelines aimed at “preventing and solving debt problems,” according to finance minister Liu Kun.

The new guidelines classify countries as high, middle and low risk,although their effectiveness “will depend on how widely [they are] applied,” Moody’s Investors Service said in a statement.

Moody’s analysts have warned that around one in four of the 115governments that have signed Belt and Road agreements to date haveforeign debt equal to at least 75 percent of their annual economic output, according to Moody’s.

Sri Lanka was forced to hand over control of its Belt-and-Road-developed Hambantota Port after debts spiraled out of control; the facility is now held by state owned China Merchants Port Holdings on a 99-year lease.

In all, 37 heads of state are attending the forum, including Pakistani Prime Minister Imran Khan, Aung San Suu Kyi, state councilor of Myanmar, Ethiopian Prime Minister Abiy Ahmed and Italian Prime Minister Giuseppe Conte, whose country is the first G7 member to sign up to Belt and Road.

Chinese lenders have provided U.S.$440 billion in financing under the plan so far, while U.S.$75 billion has been raised in Chinese bond markets, according to central bank governor Yi Gang.

But many in the plan’s partner countries fear that such largesse comes with political strings attached.

“The Belt and Road projects such as road- and bridge-building do actually bring with them economic opportunities for local people,” a Kazakh scholar who gave only a single name, Ziyat, told RFA.

“However, there are a lot of complaints around unjust treatment [of local people] by Chinese companies,” he said. “In particular, the charging of toll fees on roads built by PetroChina has caused a great deal of public anger in recent years.”

He said people in Kazakhstan are worried that their government hasborrowed a lot of debt from China and leased land to the Chinese to build factories.

“The people of Kazakhstan are now saying outright that our country hasbeen betrayed and sold to China,” Ziyat said. “We have no future.”

Back in China, labor activists warned that Chinese companies are already in the habit of ignoring the country’s own labor laws when dealing with the workforce, and that they are now exporting exploitative practices overseas.

Liu Kaiming, who directs the Institute of Contemporary Observation in the southern city of Shenzhen, said workers struggle to find redress when working overseas on Belt and Road projects.

“There is no concept of labor standards in Chinese management culture,” Liu said. “By law, they shouldn’t be holding workers’ passports.”

“But because of safety concerns and the language barrier, the vast majority of workers just live in a bubble, with no contact with the outside world,” he said.

Shenzhen worker Xie Liusheng said the Belt and Road plan will likely see far more Chinese workers going overseas to work on infrastructure projects in future.

“[Chinese] people who go abroad to work are really up the creek without a paddle,” Xie told RFA. “I think that if China is going to expand the construction of Belt and Road projects, the law needs to keep up, otherwise, there will be all kinds of problems.”

“Workers ought to get a contract that is in accordance with the wishes of both parties, and some kind of protection … if they seek to defend their rights using the law,” he said.

Political commentator Pan Lu said the Belt and Road project isn’t just an infrastructure project, either.

“This strategy was implemented after 2013, so it’s a flagship project of Xi Jinping’s administration,” Pan said. “It has Xi’s fingerprints all over it.”

He said the metaphor of the “new Silk Road” is apt, because imperial China saw contact with the outside world purely in terms of foreigners paying appropriate tribute to its emperors.

“Belt and Road has a very important secondary function, which is to act as a lifeline to authoritarian regimes along its length,” Pan said. “[The aim is to] oppose the culture of universal values [like human rights and democracy.]”

Pan said the plan is also unlikely to deliver real benefits to the Chinese people.

“The internal and external pressures generated by Belt and Road willexacerbate domestic economic difficulties, causing industries to wither, employment rates to fall and the depletion of foreign exchange reserves,” he said.

Reported by Qiao Long for RFA’s Mandarin Service, and by Wen Yuqing for the Cantonese Service. Translated and edited by Luisetta Mudie.