Covid Complicates Third-World BRI Debt Squeeze

Amid the coronavirus crisis, China won’t go easy on Belt and Road debt

By: Toh Han Shih

The ability of developing countries to service their debts to China under the Belt and Road Initiative (BRI) has weakened due to the ongoing Covid-19 pandemic, forcing Chinese state-owned banks to renegotiate construction loans they extended to financially-strapped countries. But the huge overseas debt incurred by the lenders means China’s banks won’t soften their negotiations and are likely to negotiate in ways that don’t always fit Western and multilateral norms.

The BRI is Beijing’s multi-trillion dollar plan to connect China with other nations through infrastructure projects including ports, roads and airports, where typically Chinese state-owned firms would build these projects which would be financed by Chinese state-owned banks. Senior US officials like Secretary of State Michael Pompeo have accused BRI of creating debt-traps for other countries, which the Chinese government denies.

Asia Sentinel first identified the growing problems third-world countries faced with Chinese debt as long ago as 2017. With the onset of the Covid crisis, those problems have metastasized.

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