China seeks to prevent Belt and Road debt risks

World
Europe

Achieving the goals of the Belt and Road Initiative (BRI) must unify the adequate access to development financing with debt sustainability, said China's top financial officer on Thursday.

Chinese Minister of Finance Liu Kun made the remarks at the thematic forum on financial connectivity of the second Belt and Road Forum (BRF) for International Cooperation in Beijing.

Liu noted China will establish an analysis framework for debt sustainability to prevent debt risk, adding Chinese financial institutions and BRI-related parties are encouraged to voluntarily use this tool for better financing decisions and debt management.

Yi Gang, the governor of China's central bank the People's Bank of China (PBOC), also attended the event. He said Chinese financial institutions have provided more than 440 billion U.S. dollars in funding BRI projects, and the PBOC has signed bilateral currency swaps with counterparts of 21 Belt and Road countries.

"We should strengthen debt and risk management. We should fully understand the debt problems of developing countries in an objective manner," according to the governor.

"A country's overall debt capacity should be taken into account as a way to control debt risks and ensure the sustainability of debt when it comes to the investment decisions."

For the next step, financing and investment cooperation for BRI should be market-oriented supported mainly by commercial funds. The government should leverage investment from the private sector while respecting market rules, said Yi.

Greater openness of capital flows can also bring down the cost of finance, improve the efficiency of the financial sector and allow capital to support productive investment and new jobs, and this is certainly the case here in China, according to Christine Lagarde, the managing director of the International Monetary Fund.

Lagarde added further opening up the bond market will enable double circulation and foster the internationalization of the RMB.

Kristalina Georgieva, the chief executive officer of the World Bank, and Carrie Lam, chief executive of China's Hong Kong Special Administrative Region, were also present at the thematic forum.

With the theme of "Belt and Road Cooperation, Shaping a Brighter Shared Future," the second BRF, scheduled from April 25 to 27 with 12 thematic forums, twice that during the first forum in 2017, aims to bring about high-quality cooperation under the Belt and Road framework.