BEIJING — China has signaled it is modifying its ambitious Belt and Road Initiative (BRI) to deal with criticism about a lack of transparency, environmental risks, and debt in financing infrastructure projects.
Chinese President Xi Jinping, who spoke Friday at the second Belt and Road Forum in Beijing, made it clear that his government was conscious of the widespread criticism leveled by developed countries, and complaints from Asian partners of the China-controlled BRI. The forum runs through Saturday.
“Everything should be done in a transparent way, and we should have a zero tolerance for corruption,” Xi said. His government will now offer a “debt-sustainability framework” to encourage compliance with international standards in infrastructure contracting.
Unlike his past speeches at the forum in 2017 and in several international gatherings, Xi did not lay out a global vision of what the Belt and Road plan can do to connect countries and continents. Instead, he concentrated on answering criticism about corruption and the dominance of Chinese companies in BRI projects.
Xi invited foreign and private sector partners to contribute funding to China-backed infrastructure projects. That is different from his earlier offers to provide financing for projects from Chinese banks and agencies.
“Xi Jinping is trying to deliver a readjusted BRI, providing more opportunities for non-Chinese companies to participate, delivering greener and better quality projects, being more attentive to their local economy with a humane impact as well as to the recipient country’s debt sustainability,” said Jean-Pierre Cabestan, professor at the Department of Government and International Studies at Hong Kong Baptist University.
It does not serve China’s geopolitical ambitions if the BRI is not accepted by the Western world.
In a statement Friday, the U.S. embassy in Beijing said, “We continue to have serious concerns that China’s infrastructure diplomacy activities ignore or weaken international standards and best practices related to development, labor protections, and environmental protection.”
At the forum Friday, British Finance Minister Philip Hammond said the BRI must work for everyone for it to turn into a sustainable reality. He offered British expertise in project financing.
Officials from Germany, France, Australia and Japan have also said they would like to see more opportunities for foreign companies in BRI projects.
The Chinese president has now given a clear indication that he is ready to recalibrate the project parameters even if it means losing control over many aspects of the program.
There are signs China had “backroom” talks with several institutions before Xi spelled out the changes he wanted to make in the Belt and Road program.
International Monetary Fund Managing Director Christine Lagarde said at the forum that the BRI could “benefit from increased transparency, open procurement with competitive bidding and better risk assessment in project selection.”
Said Cabestan, “Xi will make sure that his signature project remains both welcomed and sustainable.”
Supporters of the Belt and Road program often point to China’s huge foreign exchange reserves exceeding $3 trillion as proof that it can support massive infrastructure projects in 60 countries, which have been included in Beijing’s BRI map; but analysts point out that China did not originally plan to use the reserve currency for that purpose.
“It had intended not to use foreign exchange reserves, but to make investments with renminbi, which would allow for the outward transfer of China’s excess capacity, labor and construction facilities, and so on,” said John Olin Palmetto, chair professor in business at the University of South Carolina Aiken, in an interview with VOA’s Mandarin service.
New yardstick for debt
Ahead of the forum, Chinese Finance Minister Liu Kun and the country’s central bank governor, Yi Gang, announced a financial tool to measure the tolerance levels of recipient countries receiving loans for BRI projects. That was in response to criticism that Chinese financing for Chinese-built projects in poor countries was pushing them into a debt trap.
“The debt issue in developing countries should be treated objectively. If debt growth is accompanied by infrastructure improvement, enhancement of people’s livelihoods and productivity and poverty reduction, it will be beneficial for the sustainability of long-term debt,” Yi said.
Some analysts said China has not given up defending long-term loans by its banks, saying that it triggers economic development and reduces poverty. The measurement tool would not be effective if Chinese lenders are determined to extend loans to support the China-built projects, they said.
“A tool to evaluate financial sustainability looks like a public relations gimmick,” said Gordon Chang, author of The Coming Collapse of China. “BRI has generally been predatory,” he said, pointing to Sri Lanka’s decision to hand over a Chinese-built port on a long lease to rid itself of high-cost loans.