China's Xi says building initiative will set high standards, as countries fret over debt.
A cameraman films near a screen live broadcasting Chinese President Xi Jinping opening the Second Belt and Road Forum in Beijing Friday, April 26, 2019. The event celebrating the push for China-backed road, port and rail-building projects across the developing world, President Xi Jinping's signature foreign policy initiative, is one of Beijing's biggest of the year.
Developing countries have welcomed the initiative to expand trade by building roads, ports and other facilities across a vast arc of countries from Asia through Africa and the Middle East to Europe. But most Belt and Road projects are built by Chinese state-owned companies and are paid for with loans from government banks at commercial interest rates. That has fueled complaints most of the benefit flows to China and that costs are too high, pushing some countries into a debt trap.
Countries including Malaysia and Thailand have canceled or scaled back projects while Ethiopia and others have renegotiated debt repayment. He noted China issued guidelines Thursday for assessing debt risks to borrowers. The Ministry of Finance said those “debt sustainability guidelines” are based on the standards of the International Monetary Fund and other international institutions.
Chinese lenders have provided $440 billion in financing, the country’s central bank governor, Yi Gang, said Thursday. He gave no details of how much has been repaid or how much might be at risk of possible default.The Chinese debt guidelines are intended to “prevent and solve debt problems,” Finance Minister Liu Kun said Thursday. Countries would be classified as low, medium or high risk borrowers based on economic output per person, economic growth and other factors.
Despite that, the number of governments that have signed agreements to support Belt and Road has risen to 115 from 64 in 2013, China says. Beijing scored a diplomatic coup in March when Italy became the first member of the Group of Seven major economies to sign such an agreement.About one-quarter of the 115 governments that have signed agreements to support the initiative have foreign debt equal to at least 75% of their annual economic output, according to Moody’s.
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