• 5 minutes China Faces Economic Collapse
  • 8 minutes ZeroHedge: Oil And Gas Bankruptcies To Accelerate As $137 Billion Debt Matures Over Next Two Years
  • 11 minutes Trump Will Win In 2020
  • 14 minutes Oil Production Growth In U.S. Grinds To A Halt
  • 18 mins The Belt & Road Initiative: A Wolf in Sheep's Clothing?
  • 2 hours How OPEC and OECD play their role in setting oil price in light of Iranian oil sanction ?? Does the world agree with Iran's oil sanctions ???
  • 49 mins Democrats and Gun Views
  • 3 hours Drone attacks cause fire at two Saudi Aramco facilities, blaze now under control
  • 2 hours Cost of oil
  • 9 hours Swedish Behavioral Scientist Suggests Eating Humans to ‘Save the Planet’ from Climate Change. What could possibly go wrong?
  • 10 hours Trump Orders Biofuel Boost
  • 14 hours Buy Oil Monday?
  • 5 hours Iran says tanker oil sold at sea, buyer sets destination
  • 16 hours Long Range Attack On Saudi Oil Field Ends War On Yemen
  • 10 hours “Who’s going to bail out the Central Banks?”
  • 13 hours Used Thin Film Solar Panels at 15 Cents per Watt
  • 13 hours Green New Deal Preview in Texas Town
Alt Text

Banks Battle For The Aramco IPO

The battle between investment banks…

Alt Text

Oil Markets Face Serious Risk Of New Supply Crunch

Slowing global economic growth has…

Alt Text

Strong Crude Inventory Draw Sends Oil Higher

Oil prices rose on Wednesday…

ZeroHedge

ZeroHedge

The leading economics blog online covering financial issues, geopolitics and trading.

More Info

Premium Content

Is China’s $26 Trillion New Silk Road A Debt Trap?

President Xi Jinping’s “Belt and Road” trade infrastructure project could be hitting significant bottlenecks as some countries begin to sound alarms regarding the massive debt loads their governments are incurring.

Xi first announced the trade initiative also known as the “New Silk Road” in 2013, which needs more than $26 trillion of infrastructure investment by 2030 to keep regional economies expanding. The project includes railways, power plants, ports, highways and other projects across the world, with Beijing providing billions of dollars in credit to drive these schemes.

(Click to enlarge)

Major governments including the United States, Japan and India have expressed grave concern Beijing is trying to construct a new economic system that will erode their influence.

Xi said China’s trade with Belt and Road countries had exceeded $5 trillion, with outward direct investment surpassing $60 billion.

Already, some Chinese-led projects have experienced high levels of complaints that they are too expensive and give little work to local contractors. In response, some governments including Thailand, Tanzania, Sri Lanka and Nepal have halted, scaled back, and or renegotiated projects with Beijing.

In August, Malaysia’s Prime Minister Mahathir Mohamad canceled various projects including a $20 billion rail system he said his country could no longer afford.

Recently, Pakistan’s new prime minister, Imran Khan, has vowed more transparency amid fears about the country’s ability to repay Chinese loans related to the China-Pakistan Economic Corridor.

Last December, Sri Lanka had to sell its controlling stake of Port of Hambantota to a Chinese state-owned finance firm after it almost defaulted on a $1.5 billion loan from Beijing.

(Click to enlarge)

Hambantota port formally handed over to China-led company

Mohamed Nasheed, the exiled leader of the opposition in the Maldives, warned China’s debt-fueled projects in the Indian Ocean archipelago amounted to a “land grab” and “colonialism,” with 80 percent of its debt held by Beijing.

“China does not have a very competent international bureaucracy in foreign aid, in expansion of soft power,” Anne Stevenson-Yang, co-founder and research director at J Capital Research, told AFP.

“So not surprisingly they’re not very good at it, and it brought up political issues like Malaysia that nobody anticipated,” she said.

“As the RMB (yuan) becomes weaker, and China is perceived internationally as a more ambiguous partner, it’s more likely that the countries will take a more jaundiced eye on these projects.”

The Center for Global Development, a nonprofit think tank based in Washington, D.C. that focuses on international development, discovered “serious concerns” about the sustainability of the sovereign debt in eight countries receiving infrastructure project funds from Beijing.

Those were Pakistan, Djibouti, Maldives, Mongolia, Laos, Montenegro, Tajikistan and Kyrgyzstan.

For example, a $6.7 billion China-Laos railway project represents almost half of the Southeast Asian country’s GDP, according to the study.

President Choummaly Sayasone (center right), Zhang Dejiang (center left) break ground to commence construction of the China-Laos railway project in Vientiane, capital of Laos, on December 2015. Related: Can We Expect An Oil Price Spike In November?

In Djibouti, the International Monetary Fund (IMF) warned that the African country faces a “high risk of debt distress” as its public debt soared from 50 percent of GDP in 2014 to 85 percent in 2016.

Next week, a group of African leaders will gather in Beijing for an economic conference which will include talks on the “Belt and Road” initiative.

On Friday, foreign ministry spokeswoman Hua Chunying denied that Beijing is strategically implanting huge amounts of debt in its trading partners to eventually expect default and acquire the country’s assets for pennies on the dollar.

“It’s unreasonable that money coming out of Western countries is praised as good and sweet, while coming out of China it’s sinister and a trap,” she said.

Stevenson-Yang said China’s loans are recorded in dollar terms, “but in reality, they’re lending in terms of tractors, shipments of coal, engineering services and things like that, and they ask for repayment in hard currency.”

Five years into China’s debt-fuelled “New Silk Road” initiative across many countries in the Eastern Hemisphere, it seems as a handful of governments are mounting complaints against Beijing for inducing a debt trap that strips their countries of its critical assets.

By Zerohedge

More Top Reads From Oilprice.com:




Download The Free Oilprice App Today

Back to homepage



Leave a comment
  • CharlesWilliamMorganJr on September 05 2018 said:
    We have far too many articles that are essentially rail naysayers. New rail lines, especially high-speed rail, will employ multiplied thousands along the routes, and provide for cheaper, faster and more efficient trade. The new rail routes will provide a comfortable, non-polluting, safe, efficient and speedy method of travel, trade, transit and tourism. The new rail lines are essentially an investment for the public and can be expected to be profitable and contribute to paying for themselves. We need a positive view, NOT a skeptical view towards these projects!

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News
Download on the App Store Get it on Google Play