China’s Belt and Road Initiative (BRI) is facing growing opposition from participating countries as their debts associated with Chinese projects mount, according to a recent study.
The study analyzed 13,427 projects backed by China in more than 165 countries over 18 years. The projects’ total value amounts to $843 billion.
AidData found that 35 percent of BRI’s projects dealt with implementation problems, “such as corruption scandals, labor violations, environmental hazards, and public protests.”
Global Expansion
The BRI—which serves as a tool for the Chinese Communist Party’s (CCP) global expansion—finances enormous loans to developing nations for building infrastructure.The ostentatious projects have been described as being a part of so-called debt-trap diplomacy since the often unpayable loans will force the nations to repay China with goods or land.
Chinese state-owned banks provide the countries with loans they can barely afford. The loans are then used to pay Chinese companies in order to build infrastructure, including the development of roads, ports, power plants, mines, telecommunications, or banking institutions.
According to AidData’s report, 42 low- and middle-income countries have public debt exposure to China that exceeds 10 percent of its gross domestic product (GDP).
“China has used debt rather than aid to establish a dominant position in the international development finance market,” the report said.
The report said that researchers estimated that a government of an average low-to-middle-income country participating in the BRI are underreporting its actual and potential repayment obligations to China by an amount that is equivalent to 5.8 percent of its GDP. “Collectively, these underreported debts are worth approximately $385 billion,” the report said.
Franklin further said that Beijing’s goals with BRI are not only economic but also strategic and political. Its “projects seem not designed so much to win new friends as to win new dependents, especially in areas either neglected by the West or in the Western sphere of influence.”
AidData’s study also evaluated that since 2013, there were many suspensions and cancellations in BRI participant countries. Malaysia canceled $11.58 billion in projects, Kazakhstan nearly $1.5 billion, and Bolivia over $1 billion. It further states in some countries “there’s clear evidence of ‘buyer’s remorse’.”
The report also mentions that China’s annual international development finance commitments are double that of the United States’ and other major countries.
Meanwhile, in June, the United States announced a new G7 initiative Build Back Better World (B3W), whose objective is to supply developing countries with financial support to build infrastructure.
“B3W is going to increase choice in the infrastructure financing market, which could lead to some high-profile BRI defections,” Parks said.