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Be cautious of ‘Belt and Road’ amid debt trap fears, ADB chief says

China initiative likely a big boost to infrastructure investments, but it’s not risk-free
By: - Reporter / @bendeveraINQ
/ 05:24 AM May 03, 2019

NADI, FIJI—While China’s Belt and Road Initiative (BRI) would help fill the massive global infrastructure gap, it is not without risk such that the head of the Manila-based Asian Development Bank (ADB) on Thursday urged borrowers to be cautious amid fears of a Chinese debt trap.

“The Belt and Road Initiative is a very natural idea to expand the connections, the connectivity between East Asia, Central Asia and European countries all the way to Africa,” ADB president Takehiko Nakao told a press conference on the sidelines of the multilateral lender’s 52nd Annual Meeting.

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Nakao noted that even hundreds of years ago, during theHan and Tang dynasties, the Chinese had embarked on expansion of trade routes.

“And even before Western people came to Asia, there were very rich trade connections in the continent and also in the ocean by Central Asian people. The Indian, Arabian and Chinese traders were all around here,” he added.

Nakao said “there are merits of having more investments” through the BRI, “but, at the same time, we must be careful, that we must find good projects with good returns” to be financed by China.

“Even if the (loans are extended) to the government, each project identified should have strong economic ground with good returns. Otherwise, it would cause trouble in the payment capacity of the government,” he said.

Also, Nakao said the projects’ environmental and social impacts must be taken into consideration before seeking Chinese financing.

“If those are met, I think these are expanded infrastructure investments which are needed for global growth,” Nakao said.

It also helped that China itself was aware of the concerns that it might be lending to borrowers who had difficulty in paying, he said.

“There are a lot of discussions about debt issues related to the BRI, so I think the Chinese authorities also pay more attention to these issues as stated in President Xi’s remark at the BRI meeting several days ago,” Nakao noted, referring to Chinese President Xi Jinping.

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TAGS: Asian Development Bank (ADB), infrastructure investments
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