Eight years after their launch, in 2013, the new Chinese Silk Roads are not keeping people happy. While Laos inaugurated with great fanfare, Friday, December 3, a high-speed line for an investment of 6 billion dollars (5.3 billion euros) largely financed by Beijing, residents of Gwadar, in the south of Pakistan, demonstrated against the construction of a deep water port by China. The New Silk Roads, or Belt and Road Initiative, have spawned nearly 3,100 infrastructure projects in at least 70 countries.
Intended to develop China’s trade with the rest of the world, just a few years after joining the WTO (in 2001) which made it a commercial power, the program has met with varying degrees of success. If it should allow nearly 40 million people to escape poverty by 2030 according to forecasts by the World Bank, it is criticized for its opaque financial arrangements, the spectacular increase in the indebtedness of recipient countries and its sometimes disastrous environmental and social consequences. The development model that has propelled China to the rank of the world’s second economic power in barely 20 years is difficult to export.
The Covid-19 crisis has not helped. It has worsened the financial situation of countries that have benefited from Chinese loans, estimated between 1,000 and 1,300 billion dollars, a figure however difficult to verify since no budget has ever been published for all the projects. Resources accumulated by Beijing thanks to the trade surpluses recorded after accession to the WTO. Among the three countries that recently applied to benefit from the common debt restructuring framework put in place by the G20 in November 2020, two of them, Ethiopia and Zambia, have external loans held at more than 30%. by Beijing. Others risk default. Sixty percent of low-income economies are at high risk of debt distress, the International Monetary Fund (IMF) recently worried, down from just 30% in 2015.
A financial risk for Beijing
Is China taking advantage of the fragility of its debtor countries? Opinions differ. The United States accuses Beijing of using the debt to keep them in a relationship of dependence and to derive geopolitical gains. As early as 2017, US Secretary of State Tex Tillerson compared the New Silk Roads program to a “Predation economy” leading to “Payment defaults” and to “Debt to asset conversions”. But as a study by Rhodium Group dating from April 2019 showed, non-repayment led to rescheduling rather than asset sales. With one exception: the port of Hambantota that Sri Lanka ceded to a Chinese state-owned company in 2017 in exchange for the cancellation of just over $ 1 billion in loans.
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