Beijing: China’s ambitious Belt and Road Initiative (BRI) has been greatly affected by the COVID-19 pandemic, with Beijing quietly scaling back the project, particularly in the emerging markets of Africa, due to banks being over-extended and loans not being repaid on time.
According to Asia Times, even before the pandemic hit the global economy last year, Chinese lending for BRI projects was in decline as several African projects are struggling to pay back their debt to Chinese companies.
Zambia was the first country to default during 2020. It finally reached a deal in October to defer repayments to the China Development Bank. On the other hand, Kenya has just announced that it will terminate its contract with the Beijing-owned Africa Star Railway Operation Company (Afristar).
Afristar was incorporated in 2017 as part of the BRI and was supposed to operate passenger and freight operations for 10 years.
This problem of debt repayment is driving a new wave of public-private partnerships (PPP), according to Asia Times, as Beijing is encouraging Chinese companies from Mozambique to Uganda to create new PPPs to ease the debt burden on African countries by giving the companies a share of profit from revenues such as road tolls.
Meanwhile, some institutions have taken an even more critical view of the BRI. The Council on Foreign Relations recently concluded with the BRI undermines global macroeconomic stability and increases the likelihood of a sustained debt crisis in emerging markets.
The BRI not only grants unfair advantages to Chinese companies, but the infrastructure projects Beijing exports are fueled by hydrocarbons, which acts as a detrimental factor of tackling climate change. The project, touted by President Xi Jinping as the ‘project of the century’, forces several countries to adopt China’s aggressive and environmentally insensitive approach to state-building, writes Asia Times.
A lingering question thus remains on whether public criticism and attention on how the BRI is financed will curtail China’s questionable practices and usher in a new approach to debt sustainability.
The decisions and reforms put in place in the next couple of months will have huge implications for China’s grand plans.