We focused on cases for which information was available through open sources. To answer these questions, we compiled the first available database of cases of Chinese external debt renegotiations. Is the Sri Lanka case representative or an outlier? And what does the evidence show us for how China usually manages souring external loans? Assessing Patterns in China’s Debt Renegotiations Until a more sustainable model for project financing is advanced by Beijing, key political and economic questions surround China’s handling of bad debt renegotiations, both now and in the future. This realization among recipient countries will likely constrain the growth of BRI-related loans in the future acceleration of growth in Chinese outbound lending for BRI-related projects is probably off the table. A slew of recent renegotiations of BRI projects highlights the fact that concerns about these excessive debt burdens are legitimate. Sri Lanka’s decision in December 2017 to grant a 99-year concession to China on the Hambantota Port, and to agree to China Merchant Port Holdings acquiring 70 percent of the port’s operating company, serves as a cautionary tale of the dangers attached to countries’ overreliance upon Chinese financing. Most of China’s BRI projects are financed through China-sourced loans from policy banks, which some target countries can find difficult to repay, in some cases because of suspected inflation of project budgets or sub-optimal project planning. Japan, the EU, and the US have also formulated strong condemnations of the potential economic consequences of China’s external investment push, and are developing their own alternatives to Beijing’s plan.Ĭentral to such criticism and to the recent pushback are concerns around debt sustainability within recipient countries. Since that time, criticism has grown around Xi Jinping’s signature initiative, with a series of host countries delaying, renegotiating or even shelving projects with China, due to concerns around their sustainability. This second forum takes place in a very different setting than its previous edition in May 2017. On April 25, the second Belt and Road Forum opened in Beijing, promoting Beijing’s flagship foreign policy plan, the Belt and Road Initiative (BRI). Many of the cases reviewed involved an outcome in the favor of the borrower, and especially so when host countries had access to alternative financing sources or relied on an external event (such as a change in leadership) to demand different terms.
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