Coronavirus only a blip for China’s Belt and Road plan: Former central bank chief

The Jakarta-Bandung high speed railway in Indonesia is part of China’s globe-spanning Belt and Road Initiative. Photo: Xinhua. Sketched by the Pan Pacific Agency.

BEIJING, Jun 22, 2020, SCMP. Global monetary easing and low interest rates could benefit the Belt and Road Initiative, China’s former central bank governor said on Monday, brushing aside concerns about the future of Beijing’s top geopolitical project as the global economy is hammered by the coronavirus outbreak, South China Morning Post reported.

Zhou Xiaochuan, who was governor of the People’s Bank of China for more than 15 years until March 2018, said the initiative has encountered setbacks as some projects had stalled during the pandemic, while the debt burden of some participating countries had worsened. But he added that there was a silver lining.

“The current environment is good for its development as global capital is ample and the cost is relatively low. It’s a good opportunity to raise funds or optimise existing financing arrangements,” Zhou said at a forum organised by Chinese media outlet Caixin via video link.

The belt and road plan is a flagship policy of President Xi Jinping, which seeks to link Asia, Europe and Africa with a network of ports, motorways and railways. While Washington views it as a strategy from Beijing to expand its global influence, the Chinese government is selling it as a multilateral initiative to promote infrastructure investment.

As the coronavirus has spread around the globe, concerns have mounted that the initiative may lose steam as some projects become financially unsustainable due to delays and cost overruns.

Chinese companies invested US$6.5 billion in belt and road countries in the first five months of this year, up 16 per cent year-on-year, the Ministry of Commerce said. That accounted for 15.5 per cent of the nation’s total outbound investment, an increase of 2.9 percentage points from a year earlier.

But debt levels are rising among some countries involved in the plan and Beijing is reluctant to continue bankrolling all projects.

Xi announced an economic strategy shift last month that will see China turn its focus for growth to its massive domestic market, though it will maintain its diversified relationships with developing countries, including more than 60 along the belt and road plan.

Recent setbacks for the project, which was first announced in 2013, would only be blips, Zhou said.

“Despite negative comments or criticism, a slowdown in the progress of projects or a decline in the amount of fundraising is actually a normal phenomena as a pandemic prevents workers from gathering. Overall, the demand for infrastructure in belt and road countries is rising,” Zhou said.

Criticism over the debt sustainability of some projects was made by people with “an ulterior motive”, the former central bank governor said, adding there was no effective international mechanism to address high debt problems.

Zhou said solutions for debt-ridden countries were improving productivity, reforming domestic systems and integrating into the global economy, hinting that debt forgiveness is not the answer.

The Belt and Road Initiative could also help boost the internationalisation of the yuan, the use of which had stagnated in recent months amid the pandemic, Zhou said.

The Chinese currency’s share of international payments dropped to sixth position, or 1.79 per cent of the global share in May, far behind the US dollar on 40.88 per cent, the Euro on 32.9 per cent in Euro and the Japanese yen on 3.53 per cent, according to Swift data.

Carrie Lam, chief executive of Hong Kong special administrative region, said at the same event that Hong Kong’s economic future will be linked to the belt and road plan.

“Belt and road strategy will allow Hong Kong enterprises and professional services to better counter the change of international trade environment,” she told the summit on Monday morning.

“We’ll grasp the opportunities of Asian growth, belt and road and Greater Bay strategies, to recover Hong Kong and elevate it to a new level.”

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