China aims to make Belt and Road sustainable, prevent debt risks

Chinese Finance Minister Liu Kun sought to allay criticism that its infrastructure plan to boost trade and investment fuels indebtedness and lacks transparency.
Chinese Finance Minister Liu Kun sought to allay criticism that its infrastructure plan to boost trade and investment fuels indebtedness and lacks transparency.PHOTO: REUTERS

BEIJING (REUTERS, BLOOMBERG) - China aims to make the Belt and Road Initiative (BRI) sustainable and prevent debt risks, finance minister Liu Kun said on Thursday (April 25), seeking to allay criticism that its infrastructure plan to boost trade and investment fuels indebtedness and lacks transparency.

The Ministry of Finance will work with counterparts in other countries to build a “high quality, high-standard,” financing system for Belt and Road which will be market-oriented, Mr Liu told delegates at a forum to kick off a three-day Belt and Road summit in Beijing.

The government will release its analysis framework for debt-sustainability later Thursday, he said. 

Mr Yi Gang, the central bank governor, said at the same event that local currencies will be used for investments related to its flagship infrastructure plan to curb exchange rate risks.

China will follow market principles and rely on commercial funds for Belt and Road financing, Mr Yi said, adding that China will improve transparency for those projects.

“Government funding will be mainly to leverage capital from the private sector, meaning that private sector financing will be the main force while government funding will only play a guiding role, a leverage role,” he said.

Chinese financial institutions have provided more than US$440 billion (S$599 billion) for Belt and Road construction, he noted.  

The BRI is a key policy of President Xi Jinping and envisions rebuilding the old Silk Road to connect China with Asia, Europe and beyond, with massive infrastructure spending.

But it has proved controversial in many Western capitals, particularly Washington, which views it as merely a means to spread Chinese influence abroad and saddle countries with unsustainable debt through non-transparent projects.

In an apparent nod to these concerns, a draft communique seen by Reuters reiterates promises reached at the last summit in 2017 for sustainable financing - but adds a line on debt, which was not included previously.