If China wants to quieten ‘belt and road’ critics, it must meet global investing rules, says former securities watchdog boss
- Xiao Gang, former China Securities Regulatory Commission chairman, says belt and road investment built solely on Chinese funds is unsustainable
- It was his first public speech overseas since stepping down as securities watchdog chief after China’s stock market meltdown
China should make sure its investment and financing projects meet international standards to quell overseas criticism of its “Belt and Road Initiative”, a former head of China’s securities watchdog said in Washington on Wednesday.
Xiao Gang, a member of the Chinese People’s Political Consultative Conference policy advisory body and a former chairman of the China Securities Regulatory Commission, also said belt and road investment built solely around Chinese funds was not sustainable. He called for diverse sources of funding to balance risks as the infrastructure programme moved into its next stages.
In his first public speech overseas since stepping down as CSRC chief in early 2016 Xiao said it was “not plausible” to adapt all projects to all international rules.
It also was “not the best choice” to delay belt and road projects by waiting for the present climate of scepticism to pass, he said.
Xiao has kept a low profile since he was forced out of his CSRC job in the aftermath of a stock market meltdown.
He said his focus now was on research, including analysing the belt and road.
Xiao’s remarks at an event presented jointly by two influential think tanks – the Peterson Institute of International Economics and China Finance 40 Forum – came amid allegations that Beijing’s flagship multitrillion-dollar infrastructure programme is a debt trap that undermines the sovereignty of participating nations.
Diplomatic sources have told the South China Morning Post that some central and eastern European countries have become less keen to take part in the belt and road because China has failed to deliver on its promises to bring construction projects and jobs.
At the same time, US allies such as Japan and Australia have been more proactive in the Pacific region by unveiling infrastructure investment of their own to counter China’s effort.
And a growing debate is under way in China over how best to implement the belt and road programme as it enters its sixth year.
Some have called for using the belt and road to counter US President Donald Trump’s tariff war with China by expanding trade and investment ties with other countries.
Xiao admitted that China was “facing a dilemma” in fitting its belt and road projects to international standards.
China should consider amending its credit rules to create a level playing field that would be more open to other financial institutions, including foreign banks, he said. He also suggested that mechanisms be set up to handle belt and road investment disputes, strengthen risk evaluation and increase project transparency.
He was non-committal when asked whether China should enter the Paris Club, a group of officials from major creditor countries that try to address debt problems in developing nations.
The club needed to adapt to new situations to change rules and regulations, he said.
Xiao said his research foresaw the risks of debt defaults among belt and road countries and recommended developing bailout programmes for nations that defaulted on loans. But Xiao dismissed the idea that belt and road projects increased the region’s overall debt burden.
Some observers have complained that Beijing’s massive infrastructure investment across Asia, Africa and parts of eastern and central Europe has burdened recipient nations with debts they will never be able to repay.
A notable example is Sri Lanka’s southern port of Hambantota. The US$1.3 billion port was opened in 2010 using debt from Chinese state-controlled entities.
But it struggled under heavy losses, making it impossible for Colombo to repay its debts. In late 2017, the country handed the port over to China on a 99-year lease. Critics denounced the move as an erosion of the country’s sovereignty.