Opinion: The Truth About ‘China Debt Trap’

Thai prime minister Prayuth Chan-ocha meets Chinese president Xi Jinping in Beijing on April 26, 2019.

By the Spokesperson of the Chinese Embassy to Thailand

The Second Belt and Road Forum for International Cooperation (BRF) was held in Beijing from April 25 to 27. I would like to share some latest information about the relevant situation of the Belt and Road cooperation with friends from media .

The Belt and Road Initiative has gained high attention, positive responses and wide support since it was proposed. China has signed over 170 cooperative documents with more than 150 countries and international organizations, including bilateral and trilateral cooperation outlines with Mongolia, Russia, Kazakhstan, Cambodia, Laos, Czech Republic, Hungary Brunei, and so on. China has issued the “Initiative on Promoting Unimpeded Trade Cooperation Along the Belt and Road”, to which 83 countries and international organizations have subscribed.

From 2013 to 2018 China’s direct investment in B&R countries surpassed US$90 billion, realizing a turnover of US$400 billion in foreign contracted projects in these countries. The Chinese Government Scholarship – Silk Road Program has been set up, and China has signed agreements with 24 B&R countries on the mutual recognition of higher education degrees. China has signed agreements on industrial cooperation with more than 40 countries and has signed third-party market cooperation agreements with France, Italy, Spain, Japan, and Portugal.

Thanks to Belt and Road cooperation, Kazakhstan, the world’s largest landlocked country, has gained access to the sea; Belarus established its own car manufacturing industry; Maldives people’s dream of having a bridge has come true; Pakistan’s problem of lacking of electricity has been essentially improved since the launching of many energy projects; China-Laos Railway will turn Laos from “land-locked state” to “land-linked hub”. All these success stories fully demonstrate that the BRI has delivered fruitful outcomes in boosting economic growth and improving people’s lives in participating countries.

However, there have always been some media hyping up the so-called “China debt trap”. In response, we will let facts and statistics speak for themselves.

On Sri Lanka’s “debts”: The annual report of the Central Bank of Sri Lanka in 2017 shows that China’s loan balance accounts for only 10.6% of Sri Lanka’s total foreign debts, and 61.5% of China’s loans are concessional ones. Taking a look at Sri Lanka’s debts, 12% are from Japan, 14% from the Asian Development Bank, 11% from the World Bank and 39% from market borrowings, all are larger than China’s share.

China’s loans, by no means, constitute the main burden for Sri Lanka. Most of China’s projects are major ones relating to people’s livelihood, such as ports and roads, which were put forward by the successive Sri Lankan governments on the basis of thorough scientific analysis, in a bid to serve Sri Lanka’s pressing needs for economic and social development.

On Pakistan’s “debts”: According to statistics from the Pakistani government, 42% of Pakistan’s long-term debts are attributed to multilateral institutions, while only 10% are from China. The interest rate of China’s preferential loans to Pakistan is about 2%, which is much lower than that of Western countries.

On China-Malaysia Railway: The Prime Minister’s Office of Malaysia announced on April 12 that the total length of China-Malaysia railway has been reduced from 688 km to 648 km. Some stops on the railway line have been cancelled. The construction cost of Phase 1 and Phase 2 of the project has been reduced from RM 65.5 billion to RM 44 billion. The Chinese side believes that there is not necessarily a fixed pattern for cooperation. In the spirit of mutual respect and equal consultation, the governments and enterprises of China and Malaysia have reached a mutually beneficial agreement.

We can speak for sure that no country has been overwhelmed with the so-called debt burden or fallen into the so-called debt trap because of their participation in the Belt and Road. On the contrary, all the participating countries have achieved rapid growth. The so-called “debt trap” holds no water.

I would like to make two points. First, every single country is entitled to development, and has the right to realize development through financing. In this process, the borrower, the creditor and companies participating in the project shall reinforce self-discipline, regulate management and carry out risk control, and media can play a part in supervision. However, it is irresponsible to keep sensationalizing the so-called “debt trap”.

Second, the Belt and Road Initiative is open and inclusive. We welcome any country who would like to join, and are ready for bilateral, trilateral and multilateral cooperation in terms of project construction, policy coordination, as well as rules and regulations harmonization.