China’s Belt and Road may complicate payback terms amid the pandemic

China's Belt and Road may complicate payback terms amid the pandemic

The Belt and Road Initiative (BRI), China’s infrastructure investment plan, may have repercussions from its borrowing countries heavily hit by the pandemic.

Just when the global economy is spiraling, it looks like one of China’s secret trade plans may be put under fire due to the nature of the Belt and Road Initiative.

This controversial program is also considered ambitious since it strongly benefits China’s trade as it aims to connect China’s routes all the way to Central Asia, Africa, and Europe.

The Belt and Road Initiative has been criticized for placing a lot of countries with debt. China also has a track record of taking over assets for those who don’t pay on time.

However, with the coronavirus currently crippling the global economy, reports from low-income countries are requesting debt relief from China.

China's Belt and Road may complicate payback terms amid the pandemic

New Silk Road: A path to global trade domination

The Belt and Road Initiative is also inspired by the Silk Road which dates back during the westward expansion of the Han Dynasty.

This expansion made the Silk Road the main trade route in Central Asia in which we now know as Afghanistan, Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan, with India and Pakistan to the south. The routes also extended more than four thousand miles to Europe.

As early as 2013, President Xi Jinping rolled out this ambitious plan to stretch across East Asia to Europe, with the purpose of extending China’s economic and political influence.

This Belt and Road Initiative may also be in connection to “China Standards 2035” as well as “Made In China 2025” with regards to taking over the world’s technology landscape.

Countries under the BRI may struggle repaying debt

Reports from CNBC suggests that China is under pressure on extending loans to the countries under the initiative or even write those loans off because of the COVID-19 pandemic.

Kaho Yu, a senior Asia analyst at Verisk Maplecroft, told CNBC that many of the countries under the said initiative have heavily borrowed from China, and because of the coronavirus pandemic, it may complicate repayment plans down the road.

Simon Leung a banking and finance partner at Baker McKenzie observes that several important BRI projects, specifically in Indonesia, Cambodia, Malaysia, Pakistan, and Sri Lanka, have been put on hold because of the lockdowns.

In addition, Leung also mentions that the coronavirus outbreak has also led to other disruptions on labor and supply chains needed by the other BRI projects also caused by the lockdowns.

With fears of an incoming coronavirus second wave, it looks like China’s aggressive asset takeover brought about by the Belt and Road Initiative might backfire.

Images courtesy of Oto Zapletal, Michael Gaida/Pixabay

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