Belt and Road Adopts World Bank Loan Standards with Chinese Characteristics

May 18 (EIRNS)—With the Belt and Road Initiative (BRI) winning over more leaders and nations on the basis of its new—and also flexible and cooperative—infrastructure project investments; China has adopted a new policy outline which makes BRI credit more transparent as well. At the Second Belt and Road Forum for International Cooperation in on April 25-27, attended by 39 heads of state and more than 100 countries, China’s Finance Ministry introduced a “Debt Sustainability Framework” outlining exactly the conditions under which state and private banks and funds would underwrite project loans, and when they would be on concessionary terms.

This “Framework,” a document of 15 pages full of debt affordability indices and the data which would underlie them, was presented by Finance Minister Liu Kun on April 25, the opening day of the Second Belt and Road Forum in Beijing. It categorizes the ability of developing countries (or industrialized ones, but designed for the former) to assume additional project debt and repay it over the long term. Liu said it was “based on similar standards used by the World Bank and the International Monetary Fund,” according to the South China Morning Post.

Clearly the new Framework is World Bank criteria “with Chinese characteristics.” Liu said the framework document would be a guide for assessing the debt risks of countries involved in the BRI, by classifying their potential liability (for overindebtedness) as low, medium or high. But, he said, “It should be noted that even if a country is assessed as being high risk, or even in debt distress, it does not automatically mean that its debt is unsustainable in the long term,” nor that it should be denied credit. “Judgment” must always be used.

Going further, Yi Gang, the governor of the People’s Bank of China, the country’s central bank, said at the same announcement that long-term debt sustainability decisions should involve indicators such as the effects of improvements to infrastructure, of people’s living standards, of greater productivity, and of poverty reduction.