Skip to main content

Covid-19 creates bumps in China’s ‘New Silk Road’

Chinese President Xi Jinping delivering a speech via video link at the World Health Assembly virtual meeting from the WHO headquarters in Geneva, May 18, 2020.
Chinese President Xi Jinping delivering a speech via video link at the World Health Assembly virtual meeting from the WHO headquarters in Geneva, May 18, 2020. AFP - -

An increasing number of developing countries that have joined Beijing’s “New Silk Road” initiative are facing economic problems sparked by the coronavirus crisis. China now finds itself facing a dilemma between trying to salvage its own economy or forgiving and renegotiating its partners’ loans.

ADVERTISING

One of Chinese President Xi Jinping’s flagship projects is turning into a painful thorn in Beijing's side due to the Covid-19 pandemic.

Xi’s signature infrastructure project aims to connect business between Asia, Europe and Africa. But the Belt and Road Initiative (BRI) – dubbed "The New Silk Road" – is putting China in a very uncomfortable position. With an increasing number of countries reporting difficulties reconciling their economic support plans with loan repayments to China, Beijing must now avoid fulfilling the prophecies of sceptics who have warned the project is merely a debt trap in the guise of assistance.

The initiative, launched in 2013 by Xi, has already led China to invest more than $450 billion in nearly 140 countries in Asia, Europe, South America and Africa. There have been project name adjustments along the way: the initial One Belt One Road (OBOR) name was changed since the word “one” was deemed misleading for a project prone to mission creep. But the promise of the project has been consistent: Beijing lends money to its partners to build vital infrastructure – railways, roads, ports, factories – in exchange for Chinese companies finding new overseas markets.  

But since the pandemic, clouds have started to gather over the programme.

The problems first came to light when Pakistan sent an official letter to China in mid-April calling for a review of the terms and conditions of repayment of over $100 million, set for May. Beijing assured Islamabad on May 17 that it would make an effort for its “Pakistani friend". But there was no follow-up or details on the promised goodwill gesture.

‘Tricky balancing act’

"We understand a lot of countries are looking to renegotiate the terms of these loans; it is a process that will take time," a researcher at the China Development Bank – a “policy bank” that spearheads several BRI project loans – told the Financial Times. “But it takes time to strike a new deal and we cannot even travel abroad right now. The BRI loans are not foreign aid. We need to at least recoup principal and a moderate interest,” said the researcher, who did not want to be named.

Most of these requests come from African countries, which are at the heart of China's investment programme but are also economically weak and among the least prepared to cope with the current crisis, the New York Times noted in a May 18 article.

For China – facing questions about its handling of the viral outbreak in Wuhan and under pressure from US President Donald Trump’s trade threats – this comes at an inopportune moment.

None of the choices available to Beijing are good ones. On the one hand, China can hardly refuse to renegotiate loans to its partners without further tarnishing its image on the international stage. On the other hand, conceding repayment extensions or even debt relief, as the International Monetary Fund (IMF) has done to its 25 poorest member countries, is costly for China.

It's "a tricky balancing act", said Mary-Françoise Renard, director of the Institut de recherche sur l’économie chinoise (IDREC), in an interview with FRANCE 24. China "already put in place a number of measures to support its economy last year, and the pandemic has forced it to spend even more, which reduces its budgetary room for maneuver", she noted.

A problem for Xi

Beijing is caught between two imperatives: supporting its economy, which has been hard hit by the health crisis and "which remains its No. 1 priority", according to Renard, and helping its "Silk Road friends", to whom the Asian superpower has promised much in exchange for their BRI membership.

Renard notes that, fortunately for China, the country still has the means to make this great financial leap. But to do that, Xi will have to manage two problems: repayments that won't arrive when Beijing needs them most and infrastructure projects that will be delayed due to slowing economies.

"The railway between China and Malaysia and the high-speed train project in Thailand, financed by Beijing, have already had to be put on hold," noted an April report by Fitch Solutions, the research department of the Fitch rating agency.

These are setbacks that may also have a political impact for Xi. The Chinese leader has made the initiative the economic pillar of reign. Beijing has already faced criticism in recent years for the lack of transparency on loan terms and the questions about the real benefits for countries participating in the project.

Following these complaints, Xi "was forced to reboot” the programme in 2019, promising, in particular, greater transparency by ensuring its projects “follow international procurement guidelines”, wrote Felix Chang, China specialist for the US-based Foreign Policy Research Institute. Xi needs results to justify the money invested, and with the Covid-19 crisis, that will take longer than expected, added Chang.

‘Health Silk Road’

Above all, these difficulties – coupled with Washington's anti-China campaign – could lead some countries to reconsider their BRI participation or deter others from signing up, the New York Times suggested. This would be particularly damaging for China in Africa, where Beijing is locked in stiff competition with the US and Europe.

Renard, however, says Beijing could overcome these challenges in Africa. The majority of African countries "believe there’s more to be expected from China, which has so far helped them to develop, than from the United States or Europe", she said. These African countries, she noted, would only slam the door on BRI “if they had problems directly with Beijing or thought that the benefits, especially in terms of jobs, of these infrastructure projects would not materialise". Hence the importance of Beijing waging a perception campaign to placate and cajole countries in its New Silk Roads initiative.

The Covid-19 pandemic could also present opportunities for China. On Monday, at a virtual meeting of member states of the World Health Organization (WHO), Xi reiterated that his country would not let down its "friends".

In addition, the crisis could also push China to “implement a Health Silk Road” initiative to create “opportunities in the construction of healthcare facilities and increase trade in healthcare-related goods between China and BRI countries”, noted the Fitch Solutions report.

Instead of building only roads, railways or ports, the Health Silk Road could be “an extension of the BRI”, the rating agency’s analysts noted, “which focuses on improving healthcare infrastructure, enhancing the flow of healthcare-related goods and services and the exchanging of medical ideas and practices between BRI countries”. China proposed a similar extension of the project at a WHO summit in 2017.

This article has been translated from the original in French

Comments

Popular posts from this blog

SSG Commando Muddassir Iqbal of Pakistan Army

“ Commando Muddassir Iqbal was part of the team who conducted Army Public School operation on 16 December 2014. In this video he reveals that he along with other commandos was ordered to kill the innocent children inside school, when asked why should they kill children after killing all the terrorist he was told that it would be a chance to defame Taliban and get nation on the side. He and all other commandos killed children and later Taliban was blamed.
Muddassir Iqbal has deserted the military and now he is  with mujahedeen somewhere in AF PAK border area”
For authenticity of  this tape journalists can easy reach to his home town to interview his family members or   ISPR as he reveals his army service number”
Asalam o Alaikum: My name is Muddassir Iqbal. My father’s name is Naimat Ali. I belong to Sialkot divison (Punjab province), my village is Shamsher Poor and district, tehsil and post office  Narowal. Unfortunately I was working in Pakistan army. I feel embarrassed to tell you …

CPEC Jobs in Pakistan, salary details

JOBS...نوکریاں چائنہ کمپنی میںPlease help the deserving persons...Salary:Salary package in China–Pakistan Economic Corridor (CPEC) in these 300,000 jobs shall be on daily wages. The details of the daily wages are as follows;Welder: Rs. 1,700 dailyHeavy Duty Driver: Rs. 1,700 dailyMason: Rs. 1,500 dailyHelper: Rs. 850 dailyElectrician: Rs. 1,700 dailySurveyor: Rs. 2,500 dailySecurity Guard: Rs. 1,600 dailyBulldozer operator: Rs. 2,200 dailyConcrete mixer machine operator: Rs. 2,000 dailyRoller operator: Rs. 2,000 dailySteel fixer: Rs. 2,200 dailyIron Shuttering fixer: Rs. 1,800 dailyAccount clerk: Rs. 2,200 dailyCarpenter: Rs. 1,700 dailyLight duty driver: Rs. 1,700 dailyLabour: Rs. 900 dailyPara Engine mechanic: Rs. 1,700 dailyPipe fitter: Rs. 1,700 dailyStorekeeper: Rs. 1,700 dailyOffice boy: Rs. 1,200 dailyExcavator operator: Rs. 2,200 dailyShovel operator: Rs. 2,200 dailyComputer operator: Rs. 2,200 dailySecurity Supervisor: Rs. 2,200 dailyCook for Chinese food: Rs. 2,000 dailyCook…

Historical relationship between Kurd and Baloch.

The Kurds are the ethnical group living in a region known as Kurdistan which is divided into Iraq, Syria, Turkey and Iran. They  are struggling for an independent region since decades and they are famous for their female guerrilla fighters.        On 25 September 2017, the referendum for an independent Kurdish region  was held in Iraq with a turn out of 72 %.   On this important occasion, the historical relation between Kurd and Baloch people is worth discussing.       When it comes to history, every nation tends to find its roots and origin. Same goes with the Baloch people. The Baloch people are always curious  about  finding their roots in history. Even if you  talk to a shepherd in Balochistan, he will be curious to talk about his  tribal or ethnical roots.      The Balochs have always conveyed the history to the next generations in different mediums like poems etc. No Baloch before 20th century had written books on  history  or origin of the Baloch nation .
        Balochs…