Moody’s highlights fears over Belt and Road’s credit risks

China’s flagship economic “Belt and Road Initiative” has been stamped “credit positive”, overall by Moody’s Investors Service.

But to successfully implement some of the wildly ambitious projects earmarked within the plan in coming years, the influential agency warns too that officials face some huge logistical and fiscal challenges, due to the significant credit risks in doing business with some of the country’s eager to sign up to the infrastructure-targeted plans, many of which have poor credit profiles.

In a hard-hitting report published this week, Moody’s also warns China, that if it is not careful, the Beijing government could find itself being lumbered with the lion’s share of the costs involved.

The Belt and Road – proposed by Chinese President Xi Jinping in 2013 to strength ties between China and a host of countries in Eurasia and beyond along the ancient Silk Road trading routes – is being designed to economically benefit all parties concerned, but crucially, many analysts suggest its ultimate goal is to encourage much wider use of the renminbi as an international currency.

“(The initiative) will result in increased exposure by Chinese issuers to countries with comparatively poor credit profiles, including weak financial strength, high susceptibility to event risk, and unfavourable business environments,” said Lilian Li, a Moody’s vice-president and senior analyst.