US Doesn’t Have The Money To Match Beijing’s “Belt-and-Road” Initiative (#GotBitcoin?)
Xi Jinping, looking to expand global program—and responding to criticism—invites multilateral input. US Doesn’t Have The Money To Match Beijing’s “Belt-and-Road” Initiative (#GotBitcoin?)
China has unleashed easy credit for more than five years to fuel its ambitions to build global infrastructure, heaping debt upon itself and other developing economies.
President Xi Jinping is now adjusting that strategy, pledging to reformulate his Belt and Road Initiative with greater emphasis on market principles and sustainability.
The U.S. and other countries have warned that aspects of the program pose financial risks to borrowers, alleging a lack of transparency and graft in deals that primarily benefit Beijing.
China doesn’t intend to go it alone, Mr. Xi said in a speech on Friday. He referred repeatedly to “Belt and Road cooperation,” inviting foreign and private-sector partners to play a bigger role.
“Going ahead, we should focus on priorities and project execution,” Mr. Xi said, “just like an architect refining the blueprint.”
His pledges at a Beijing forum, where he hosted three dozen foreign leaders, marked the highest-level acknowledgment that China’s efforts to export its speedy, government-led brand of development carry risks for participating countries, and itself.
While many developing countries have embraced Mr. Xi’s infrastructure program since its 2013 launch, doubts have festered over whether the primarily Chinese-funded and built projects are always worth the money.
In Pakistan, heavy debt associated with Chinese projects helped sway an election, while the cost of a highway in Montenegro has threatened to devour its budget. Kenya has argued that Chinese infrastructure building hasn’t created many jobs for locals, while Malaysia recently negotiated a one-third cut in the price of a railway project its officials suggested originated due to graft.
Those challenges are mounting amid pushback from the U.S. about how Beijing wants to reshape the global order and as China’s debt-heavy domestic economy faces new trouble.
Far from abandoning an initiative he has enshrined in his Communist Party’s governing charter, Mr. Xi outlined a more expansive definition of Belt and Road, stretching it beyond infrastructure-building into areas including international cooperation in education and media.
‘We need to pursue open, green and clean cooperation,” he said in his Friday speech.
Mr. Xi also called for more multilateral and commercial funding for infrastructure projects, a contrast to his pledges of Chinese financing in a similar speech two years ago.
Beijing is fine-tuning Belt and Road, according to Zhang Zhexin, an analyst at Shanghai Institutes for International Studies. Its initial presentation was too broad and too loud, he said, and participating countries—often in distress—saw the program as a source of easy money from China.
“China just doesn’t have the resources to fulfill everyone’s demand,” Mr. Zhang said.
First pitched in 2013 as a platform to spur global development, the Belt and Road Initiative has pushed China’s massive construction, telecommunications and shipping companies to go global as a cooling domestic economy reduces business at home.
But as the program ballooned beyond infrastructure construction, Western officials—including from the U.S., which snubbed the Belt and Road forum—blamed it for advancing opaque financial deals that give Beijing political leverage by burdening countries with debt to China.
As criticism built over the past year or so, Beijing de-emphasized big-ticket infrastructure projects in its Belt and Road publicity and stepped up pledges to ensure sustainable lending and fight graft.
“Everything should be done in a transparent way and we should have a zero tolerance for corruption,” Mr. Xi said Friday.
As part of the oversight effort, Chinese officials have been negotiating with foreign governments to draw up lists of official Belt and Road projects, people familiar with the matter said, a move that would curb misuse of the Belt and Road label.
Ahead of Mr. Xi’s speech on Friday, Chinese officials appeared at side seminars to stress their attention to financial risks in the program and their desire to attract private-sector money.
“A country’s total debt capacity should be taken into account,” Yi Gang, governor of the People’s Bank of China, told a seminar on Thursday. “Private lending should be the mainstay” in financing projects to achieve sustainable development, he said.
International Monetary Fund Managing Director Christine Lagarde welcomed the shift in tone, telling the forum after Mr. Xi’s speech that the initiative could “benefit from increased transparency, open procurement with competitive bidding and better risk assessment in project selection.”
Some observers don’t expect China to slim down the Belt and Road program, despite Mr. Xi’s pledged adjustments.
Recalibrating Mr. Xi’s signature foreign policy is a welcome move but also “a big ask,” said George Magnus, an economist at Oxford University’s China Center. “To change its structure by incorporating Western ideas and values including the rule of law, full and open accounting, and market-based transparent lending standards and terms is most likely a bridge too far.”
China is adapting to current circumstances, but its long-term goals remain unchanged, said Kishore Mahbubani, a former senior Singapore diplomat who was in the audience for the Chinese leader’s speech. “They’re still rich in capital.”
Beijing’s more circumspect public messaging belied its highhanded approach when negotiating with some foreign diplomats during preparatory meetings for the forum, people familiar with the process said.
In meetings to draft a joint statement for Mr. Xi’s Saturday summit with foreign leaders, a Chinese diplomat chastised some negotiators, particularly European officials, after they pressed for references to best practices in business and investment, as well as human rights, the people familiar with the process said.
Guo Xuejun, a deputy director-general at China’s Foreign Ministry who chaired the meetings, accused the negotiators of showing disdain for Mr. Xi and China. He dismissed European requests for references to reciprocity as “American language,” referring to similar U.S. demands in trade talks with China, the people said.
“Remind me to disinvite your president,” Mr. Guo said at one point, according to the people, who said Chinese officials lodged diplomatic complaints against countries that sought amendments it disliked. China’s Foreign Ministry didn’t respond to a request for comment.
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