{"id":55,"date":"2021-04-21T06:18:31","date_gmt":"2021-04-20T23:18:31","guid":{"rendered":"http:\/\/uclg-aspac.org\/brlc\/?p=55"},"modified":"2021-04-21T06:18:31","modified_gmt":"2021-04-20T23:18:31","slug":"coronavirus-threatens-chinas-belt-and-road-what-happens-when-it-wants-half-a-trillion-dollars-back","status":"publish","type":"post","link":"https:\/\/uclg-aspac.org\/brlc\/2021\/04\/21\/coronavirus-threatens-chinas-belt-and-road-what-happens-when-it-wants-half-a-trillion-dollars-back\/","title":{"rendered":"Coronavirus threatens China\u2019s Belt and Road. What happens when it wants half a trillion dollars back?"},"content":{"rendered":"\n

By SHASHANK BENGALI<\/a>, NEHA WADEKAR MAY 20, 2020 11:08 AM PT<\/p>\n\n\n\n

NAIROBI, Kenya \u2014 When Chinese engineers flew home in January for the Lunar New Year, few in Africa would have imagined that a coronavirus outbreak was about to ground planes, upend supply lines and freeze work on dozens of Chinese-built roads, railways, ports and power stations.<\/p>\n\n\n\n

Many of the engineers haven\u2019t returned. Construction sites fell silent. And now the COVID-19 pandemic has unleashed a global recession<\/a> that threatens the colossal international loan program that is a symbol of China\u2019s growing prestige and a centerpiece of President Xi Jinping\u2019s reign.<\/p>\n\n\n\n

The Belt and Road Initiative<\/a> \u2014 China\u2019s effort to finance nearly half a trillion dollars in new infrastructure across Asia, Africa, Europe and Latin America \u2014 took flight during a period of global expansion and easy travel that has now slammed into a sober reckoning.<\/a><\/p>\n\n\n\n

Beijing faces mounting calls to reschedule loans for shipping hubs, electrical plants and transport links that look unsustainable as\u00a0economies struggle<\/a>\u00a0and globalization slows. The projects\u2019 reliance on Chinese workers could also draw greater opposition from local populations worried about fresh waves of coronavirus infections. <\/p>\n\n\n\n

No major contracts have been canceled due to the pandemic, and the initiative is too important to Xi to be shelved. But seven years after the Chinese leader\u00a0unveiled his vision<\/a>\u00a0of a modern Silk Road connecting continents, the future of travel and trade is uncertain. Analysts say the most ambitious international building spree since the Marshall Plan could be scaled down and refocused toward safer investments.<\/p>\n\n\n\n

\"\"
Port City Colombo in Sri Lanka, shown in 2018, is one of many Chinese-backed projects worldwide that have stalled due to the COVID-19 pandemic. (Paula Bronstein \/ Getty Images)<\/figcaption><\/figure>\n\n\n\n

Chinese state media have already begun trumpeting less costly global initiatives focused on technology and healthcare \u2014 moves that could further intensify China\u2019s geopolitical tug of war<\/a> with the U.S.<\/p>\n\n\n\n

\u201cThe ultimate test of the BRI was always going to come when the global economy became less forgiving, and we\u2019re in that environment now,\u201d said Jonathan Hillman<\/a>, senior fellow at the Center for Strategic and International Studies in Washington.<\/p>\n\n\n\n

\u201cThe rest of this year and beyond, China may spend more time renegotiating deals than negotiating new deals.\u201d<\/p>\n\n\n\n

Beijing insists that the initiative remains on track and that \u201cthere is a solid foundation and great potential for further cooperation\u201d with Belt and Road partners, according to a report in state media last week. Over the past decade, China became the world\u2019s biggest development financier as state-owned banks backed costly building projects in risky markets \u2014 expanding Beijing\u2019s influence<\/a> and creating new opportunities for its companies. According to one estimate, African nations<\/a> alone owe China $145 billion, with $8 billion in payments due this year.<\/p>\n\n\n\n

\"\"
A display board showcases projects at the media center of the Belt and Road Forum in Beijing in 2019.\n(Andy Wong \/ Associated Press)\n<\/figcaption><\/figure>\n\n\n\n

Beijing has remained noncommittal as governments from Ghana to Pakistan publicly ask China to freeze loan payments. After signing on to a pledge by the Group of 20 rich economies to cease collecting interest from poor countries for the rest of the year, Chinese state media clarified that many large Belt and Road loans were \u201cnot applicable for debt relief.\u201d<\/p>\n\n\n\n

China has instead begun to quietly offer refinancing options to individual countries, continuing a practice of secretive negotiations that have obscured the terms of most of its lending. One country Beijing has approached is the Maldives, an Indian Ocean archipelago that has struggled to keep up with payments on\u00a0$3 billion in Chinese loans<\/a>\u00a0secured by\u00a0a former president<\/a>\u00a0now imprisoned for money laundering.<\/p>\n\n\n\n

\"\"
China helped finance the Sinamale Bridge in the Indian Ocean nation of the Maldives.\n(AFP \/ Getty Images)\n<\/figcaption><\/figure>\n\n\n\n

\u201cThis is an economic shock that has been in part induced by China\u2019s own handling of the virus, so countries clearly have the expectation that China has to do something,\u201d said Andrew Small<\/a>, a senior transatlantic fellow at the German Marshall Fund of the United States. \u201cBut China wants to keep negotiating bilaterally, where they have more leverage.\u201d<\/p>\n\n\n\n

The refrain from borrowers to China has been consistent: We can\u2019t pay you back.<\/p>\n\n\n\n

\u201cTo be honest, no one at this stage can afford paying anything due to the crisis,\u201d the finance minister of the African nation of Djibouti, Ilyas Moussa Dawaleh, said in an interview. \u201cWe have so many other urgent issues to deal with.\u201d <\/p>\n\n\n\n

Over the past decade, Djibouti, strategically located at the mouth of the Red Sea, has taken on $1.2 billion in loans\u00a0from China<\/a>\u00a0to finance a free trade zone, deep-sea port, railway and water pipeline to Ethiopia and other projects. Djibouti\u2019s total debt to China now exceeds 80% of its entire economic output, the most of any low-income country, according to the\u00a0Center for Global Development<\/a>, a Washington think tank.<\/p>\n\n\n\n

\"\"
Chinese President Xi Jinping, center, and his wife Peng Liyuan welcome Djibouti\u2019s president, Ismail Omar Guelleh, at the Belt and Road Forum in Beijing in April 2019. (Associated Press)<\/figcaption><\/figure>\n\n\n\n

Dawaleh said China \u2014 which has also built its only overseas military base in Djibouti, less than 10 miles from the main U.S. military installation<\/a> in Africa \u2014 has yet to offer to renegotiate loan terms.<\/p>\n\n\n\n

\u201cTo be honest,\u201d he said, debt relief \u201cshould be something considered from China, too.\u201d<\/p>\n\n\n\n

African nations are at particular risk of default, said\u00a0Eric Olander<\/a>, managing editor of the China Africa Project, an independent website. Ethiopia, South Africa and Kenya have all had their credit downgraded, making it harder for those governments to borrow more to get through the recession. <\/p>\n\n\n\n

\u201cThere isn\u2019t very much time left before the situation for some of Africa\u2019s largest and most important economies goes from bad to a lot worse,\u201d Olander said.<\/p>\n\n\n\n

\"\"
A cargo train travels on a Chinese-financed railway line in Mombasa, Kenya, in 2017.\n(Khalil Senosi \/ Associated Press)\n<\/figcaption><\/figure>\n\n\n\n

China, which has rejected criticism<\/a> that its early handling of the outbreak helped the virus spread<\/a>, is trying to fight the perception that it would take advantage of vulnerable debtors in the middle of a pandemic.<\/p>\n\n\n\n

The Trump administration and other critics have denounced China for \u201cdebt-trap\u201d contracts that sometimes require borrowers to put up ports, copper mines or other assets as collateral. Many Chinese have also\u00a0begun to grumble<\/a>\u00a0about the vast sums being invested abroad despite economic troubles at home. <\/p>\n\n\n\n

In recent years China renegotiated several deals, shrinking the cost of a railway line in Malaysia by one-third and a port in Myanmar by more than 80%. Last year, Xi unveiled a\u00a0more modest vision<\/a>\u00a0for the Belt and Road, one with higher standards of economic sustainability, transparency and environmental protection.<\/p>\n\n\n\n

\"\"
Construction on a railway line connecting eastern and western Malaysia resumed in July 2019 after China agreed to reduce the project cost by one-third.(Vincent Thian \/ Associated Press)<\/figcaption><\/figure>\n\n\n\n

\u201cChina will consider ways of relieving the debt burden,\u201d said\u00a0Tang Xiaoyang<\/a>, deputy director of the Carnegie-Tsinghua Center for Global Policy in Beijing. \u201cIt may not be debt cancellation. But there will be a method to reduce the payment burden so that borrowing countries may recover more quickly.\u201d In the meantime, China has begun emphasizing healthcare initiatives, projecting itself as a humanitarian leader that vanquished COVID-19. Xi has pledged $2 billion to help battle the pandemic, but China\u2019s efforts to supply the world with medical equipment have been marred by\u00a0flaws in its test kits<\/a>.<\/p>\n\n\n\n

\"\"
A worker makes masks on a production line in Nanjing, China, in February.(Costfoto \/ Barcroft Media)<\/figcaption><\/figure>\n\n\n\n

Xi has also touted China\u2019s ability to build digital infrastructure, including ultra-fast\u00a05G internet technology<\/a>\u00a0and apps that could help respond to outbreaks. Products built by Chinese tech companies usually come with fewer privacy protections than those of their Western counterparts, but have\u00a0found their way<\/a>\u00a0into Belt and Road countries.<\/p>\n\n\n\n

Pakistan<\/a>\u00a0last month asked China for an extension on payments connected to $30 billion in loans for energy projects, most of which are\u00a0beset by delays<\/a>. Meanwhile,\u00a0Huawei<\/a>\u00a0\u2014 the Chinese tech giant that the Trump administration accuses of being\u00a0a backdoor for espionage<\/a>\u00a0\u2014 built a cross-border fiber optic cable deep into Pakistan in less than two years for under $50 million.<\/p>\n\n\n\n

\"\"
A Pakistani motorcyclist drives on a newly built Pakistan-China Silk Road highway in 2017. (Aqeel Ahmed \/ Associated Press)<\/figcaption><\/figure>\n\n\n\n

\u201cWe will definitely see a bigger emphasis on digital infrastructure,\u201d Hillman said. \u201cTelecommunications projects cost less and are less risky on both sides. They\u2019re easier to complete. And they require fewer workers, in an environment where there was a resentment of Chinese workers even before the pandemic.\u201d<\/p>\n\n\n\n

The U.S. attempted to counter Belt and Road last year by launching the International Development Finance Corp., which recently announced its first $900 million<\/a> in financing. But the program \u201cwill likely struggle in the new coronavirus environment in which U.S. attention is focused on resolving the crisis instead of competing with China\u2019s BRI,\u201d said Derek Grossman<\/a>, a senior defense analyst at the Rand Corp.<\/p>\n\n\n\n

In Asian countries with closer links to China, some Belt and Road projects have continued despite the pandemic.<\/p>\n\n\n\n

This month, Indonesian crews\u00a0completed a tunnel<\/a>\u00a0along a $6-billion high-speed railway line, with some of the work supervised remotely by Chinese engineers using video chat. A $6-billion railway in Laos has\u00a0remained on schedule<\/a>\u00a0after Chinese supervisors recruited local university graduates to help with construction. <\/p>\n\n\n\n

Sri Lanka, which banned international flights in early April, has begun to allow Chinese engineers in to resume work on Port City Colombo, a new business district rising on reclaimed land in the capital, backed by $1.4 billion in Chinese money.<\/p>\n\n\n\n

\"\"
Port City Colombo in Sri Lanka is being built on land reclaimed from the Indian Ocean and funded with $1.4 billion in Chinese investment.(Paula Bronstein \/ Getty Images)<\/figcaption><\/figure>\n\n\n\n

The island nation is Exhibit A<\/a> for Belt and Road debt, having signed over control of a port to China on a 99-year lease when it couldn\u2019t make interest payments. But the government recently took out more than $500 million in emergency loans<\/a> from Beijing to fill a budget shortfall.<\/p>\n\n\n\n

\u201cAfter this coronavirus, Chinese involvement in Sri Lanka will be even more,\u201d said Rohan Karunaratne, president of a Sri Lankan\u00a0construction industry group<\/a>. <\/p>\n\n\n\n

\u201cDuring the COVID period, both countries worked together very well. We will need investment, and China has always helped us in the past.\u201d<\/p>\n\n\n\n

\"\"
Chinese engineers are due to return to Sri Lanka soon to resume construction on Port City Colombo, shown in 2018. (Paula Bronstein \/ Getty Images)<\/figcaption><\/figure>\n\n\n\n

In Africa, too, analysts say the recession could drive countries closer to Beijing. W. Gyude Moore<\/a>, a senior policy fellow at the Center for Global Development, said African governments explicitly haven\u2019t asked China to cancel their debts because they hope to leave that funding channel open.<\/p>\n\n\n\n

\u201cAccess to finance is going to be really, really hard,\u201d Moore said. \u201cAnd one of the few places where Africans might be able to turn for financing for infrastructure and other things will be China.\u201d <\/p>\n\n\n\n

This article retrieved from: https:\/\/www.latimes.com\/world-nation\/story\/2020-05-20\/coronavirus-strikes-chinas-belt-and-road-initiative<\/a>, 2:43 PM Jakarta Time.<\/p>\n","protected":false},"excerpt":{"rendered":"

By SHASHANK BENGALI, NEHA WADEKAR MAY 20, 2020 11:08 AM PT NAIROBI, Kenya \u2014 When Chinese engineers flew home in January for the Lunar New Year, few in Africa would have imagined that a coronavirus outbreak was about to ground planes, upend supply lines and freeze work on dozens of Chinese-built roads, railways, ports and power stations. Many of… Read More »Coronavirus threatens China\u2019s Belt and Road. What happens when it wants half a trillion dollars back?<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":56,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"neve_meta_sidebar":"","neve_meta_container":"","neve_meta_enable_content_width":"","neve_meta_content_width":0,"neve_meta_title_alignment":"","neve_meta_author_avatar":"","neve_post_elements_order":"","neve_meta_disable_header":"","neve_meta_disable_footer":"","neve_meta_disable_title":"","footnotes":""},"categories":[2],"tags":[],"class_list":["post-55","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news"],"yoast_head":"\nCoronavirus threatens China\u2019s Belt and Road. 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