China says it will resolve debt issues of ‘belt and road’ projects, respects Malaysia decision to pull out

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China says it will resolve debt issues of ‘belt and road’ projects, respects Malaysia decision to pull out

China on Saturday acknowledged there were debt issues with some projects under its “Belt and Road Initiative”, saying the government will strengthen macro-supervision on the debt sustainability aspect of its overseas investments.

Speaking on the sidelines of annual International Monetary Fund and World Bank meetings on the Indonesian island of Bali, vice-finance minister Zou Jiayi told a panel that, “the debt sustainability issue of belt and road [projects] is a complicated issue, but we will take care of it”.

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Beijing has been promoting the belt and road plan since 2013, as President Xi Jinping expands trade corridors along a modern-day Silk Road linking Asia, Europe and Africa, pumping credit into building roads, railways and ports in a trillion-dollar infrastructure initiative.

Zou said China could optimise and diversify its belt and road debt financing with more foreign direct investment, public-private partnerships, and equity investment, as opposed to commercial loans that could be more expensive.

But the initiative has been met with growing scepticism as some countries, such as Sri Lanka, became saddled with debt they had difficulty in repaying.

One of the top recipients of China’s largesse, Malaysia, has recently stopped work on a US$20 billion rail link between its east and west coasts, a rare setback for the Beijing initiative.

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Zou said the Chinese government fully respected Malaysia’s decision-making and judgment, stressing the projects were signed on a commercial basis, and countries were free to vet and evaluate the terms of the projects.

“Malaysia adequately communicated with the China side on the issue. We respect Malaysia’s decision based on their debt sustainability analysis,” she said.

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