CHINA’S Belt and Road Initiative (BRI) was originally conceived as a massive program that will create greater economic integration between Africa, Asia and Europe by establishing more infrastructure to facilitate trade. China gains more markets and partners, while BRI partners gain much needed infrastructure investment.
Today, all that seemed like a naïve dream. The BRI built hospitals power stations, ports, railways and other infrastructure in many countries that needed it, but it also led to a lot of wasteful spending, like stadiums and skyscrapers.
Recently, BRI programs are facing major problems, with two of China’s more prominent borrowers, Sri Lanka and Pakistan, facing serious economic issues.
According to reports, the total value of Chinese loans that had to be renegotiated in 2020 and 2021 was around $52 billion, and it may be rising. The BRI partners/debtor countries just couldn’t pay back the loans. Part of this was caused by the pandemic, but the problem goes deeper than that, as the slowing global economic situation is that it prevents BRI partners from paying China.
Adding to this problem is China’s ongoing domestic issues, which are being caused by its weakened real estate, namely bank protests in Henan province as well as its real estate market. All these problems are taking place in a situation where the world is in a recession, along with several other fundamental problems.
So China’s days of foreign lending seems to be at an end, at least for now. The BRI was designed to extend China’s growth by expanding its trading ties. That hasn’t worked out, and as Central Banks try to tighten interest rates, China’s internal debt problems are just one more issue in an increasingly growing distressed global economic environment./PN
