Belt and Road helps global development
- US Vice-President Mike Pence claims China’s programme is saddling developing countries with loans they can’t afford
- Beijing needs to enhance transparency of its lending standards to show the benefits of the BRI
Does China practise stealth imperialism by saddling developing countries with loans they can’t afford with its “Belt and Road Initiative” (BRI) and compromising their sovereignty?
United States Vice-President Mike Pence made that controversial claim at the Asia-Pacific Economic Cooperation (Apec) summit in Papua New Guinea.
“Know that the US offers a better option,” he told Apec. “We don’t drown our partners in a sea of debt, we don’t coerce, compromise your independence. We do not offer constricting belt or a one-way road.”
Actually, his claim that the US doesn’t “coerce, compromise your independence” is demonstrably false, given the long history of American invasions, CIA-sponsored coups, assassinations, sanctions and subversion around the world. And there is a rich economic literature on the failures of Western aid in the third world. But let’s skip all that, since we are talking China.
In her rebuttal, foreign ministry spokeswoman Hua Chunying said: “Not a single developing country has been mired in debt difficulties because of its cooperation with China.”
So who’s right? Actually, both are being disingenuous, but Pence has vastly exaggerated his claim. Fortunately, there are independent bodies that study these things. A recent study by a Washington-based think tank, the Centre for Global Development, studied the likelihood of debt problems in 68 countries identified as potential BRI borrowers. The centre’s board is headed by Lawrence Summers, the former US treasury secretary.
Its study concludes that only eight countries are at particular risk of debt distress: Djibouti, Kyrgyzstan, Laos, the Maldives, Mongolia, Montenegro, Pakistan, and Tajikistan. Surveying the whole range of borrowing countries in China’s sprawling infrastructure-financing programme, it concludes that the risk of widespread debt distress is unlikely.
“The majority of BRI countries will likely avoid problems of debt distress due to BRI projects,” it concluded.
Still, eight out of 68 is almost 12 per cent of borrowers. While not high, it is legitimate cause for concern. However, it doesn’t justify Pence’s alarmist statement at Apec or claims that China practised “predatory lending” through BRI.
Another analysis by the Peterson Institute for International Economics has pointed out that Washington is already using such claims to bolster its powers to veto future rescue packages put together by the International Monetary Fund for potential distressed countries linked to BRI.
To fight back, China needs to enhance transparency for its lending standards and records – to show BRI helps rather than hinders global development.