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Is China’s “Belt and Road” debt good or bad: That’s the wrong question

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When I was growing up, my parents warned me about two things: Boys, and Debt.  I grew up strongly aware that I was to avoid both, and to approach them with a lot of skepticism.

My husband, on the other hand, was told the opposite: search hard for a great partner, and – if you’re investing in your home and future, stretch and raise as much debt as you can possibly manage.

Now, happily married for 11 years, still working hard, having paid off our student loans, but paying off our mortgage every month still, I guess we found a healthy and happy balance to both partnerships and debt.

But what is a healthy and happy balance to partnerships and debt for the government of an entire country like Kenya, where I was born? Should countries be cautious or should they be proactive, and stretch themselves?

Well, here is the challenge. Africa NEEDS a great deal of new infrastructure – from trains to power stations. But African governments are not large or rich enough to pay for this by themselves – they need external help as loans from either the private sector or other international partners to at least 63bn U.S. dollars per year, according to an estimate by the African Development Bank. The continent will also face additional costs due to climate change of 20–30 billion U.S. dollars per year.  Asian and Pacific countries also need more debt, their “infrastructure gap” is estimated at around 250bn U.S. dollars per year.

Just like my family, in order to grow, they HAVE to take on more debt. 

As an economist, I should know this. It’s been shown in many studies that the more that countries spend on infrastructure, the more their economies grow.

As a result, it’s not the AMOUNT of debt that matters; it’s the TYPE of debt that matters…In particular, are the debt going into projects that will be productive in the future?

That’s why the Kenyan president, in a recent interview with CNN said, “What would worry me is if the debt was going into… paying salaries, or electricity bills, and so on. But what we have used our debt for is to close the infrastructure gap”.

The good news is there is no shortage of productive infrastructure projects for China or others to invest in. In African countries, where over 600 million people don’t have access to energy, renewable energy projects will enable young people to read and do their homework with light, enable factories to run better, without creating air pollution and climate change effects. 

In Asia, green inner and inter-city transport is great investments – enabling more people to move around to seek jobs. In Latin America and the Caribbean, investment in tourism and transport will also deliver decent returns.

Are these productive investments being prioritized by China and others? Not necessarily, for three reasons.

A lack of transparency can be the first reason. Governments should be conducting more due diligence of companies and companies themselves be more open. For instance, some companies – including from China – are still used for projects despite being on World Bank blacklists for corrupt practices. These blacklists may have shortcomings, but there are also opportunities for better performing companies to be chosen.

The second reason is “tying”. This is a policy used by many countries – including America, Japan and China – of requiring that loans or aid they give to other countries should go to a project that is built by their own companies. This type of securing “win-win” can be helpful to ensuring projects get done quickly and even avoid corruption. But tying can also create massive conflicts of interest, shifting the focus away from the poor people that the finance is meant to help. However, many countries – including the U.S. and Japan – are reluctant to stop tying.

That said, through its most recent Foreign Investment Law, China has made a landmark move by opening up domestic government procurement to foreign firms. Hopefully this principle will also be applied to projects supported by China abroad and thereby “untie” them.

The third and final reason why the most productive projects may not be picked is a lack of leadership. Governments need to work much harder to prioritize the most sustainable and green projects that their citizens need and in a manner they want – including using local companies, local materials and local labor.

As the 2nd belt and road forum takes place here in Beijing, my hope is that the discussion about debt in poor countries will be less about debt from China or the amount, but more about better debt from everyone. Indeed, China’s offer of 100bn U.S. dollars a year is less than 10 percent of the total infrastructure gap for poor countries around the world. Poor countries will still have to look beyond China.

With the BRI, and new global funds like the Asian Infrastructure Investment Bank, America’s new infrastructure fund called BUILD, and a new infrastructure facility for the Pacific from Australia, there is a great opportunity ahead for everyone.

Let’s not be as cautious as my parents told me to be. The world will not be able to meet the UN’s Sustainable Development Goals unless poor countries get more cheap loans. But like the loans that my husband and I took out to fund our future, let’s work hard to make sure the debt is productive as quickly as possible.

Editing & designing: Zhao Yuanzhen and Wang Xinyan

Videographer: Sheng Jie

Animation: Li Xingguang and Zhou Kai          

Video editors: Chen Hangyu, Zhang Qingxiao and Sheng Jie

Producer: Bi Jianlu

Supervisor: Mei Yan Editor’s Note: The 2nd Belt and Road Forum for International Cooperation will be held in Beijing in late April. The Belt and Road Initiative (BRI), put forward by Chinese President Xi Jinping in 2013, has attracted cheers and jeers at the same time. A total of 124 countries and 29 international organizations have signed up for the sprawling transcontinental connectivity project, despite a tireless chorus of opposing voices and a cacophony of claims about its intention and operations. CGTN is attempting to cut through the noise in a new short video series titled “Hype or Hope?” Here is the first of our five episodes to help you separate BRI facts from fiction.

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BRI cooperation crucial for post-Covid economic recovery, says expert

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ISLAMABAD: The Belt and Road Initiative is crucial for global economic recovery in the post-pandemic era and building a community with a shared future for mankind by following a path of cooperation, unity and common development, said a political economist.

“Enhanced constructive engagements based on the principle of win-win cooperation is the need of the hour to overcome the challenges posed by the still raging pandemic, and ensure sustainable global economic recovery,” Shakeel Ahmad Ramay, director of the China Study Center at the Sustainable Development Policy Institute, an Islamabad-based think-tank, told Xinhua in an interview.

He said that China is strongly committed to implementing the BRI for the common good, which is evident from the recently held high-level conference on the Belt and Road cooperation in the Asia-Pacific region.

“It (conference) shows the strong commitment of China to global cooperation and sustainable recovery and development […] China has assured its support to BRI countries. China is willing to provide market opportunities, investment opportunities and growth opportunities for global recovery,” the expert said.

Terming the BRI a proactive constructive economic cooperation plan, Ramay said that despite the global economic disruptions and worldwide lockdowns, China did not pause the initiative and continue to pour investments into various countries, especially the least developed countries.

China kept on investing in BRI programs when the world was going through a serious economic fallout due to Covid-19, giving the much-needed breathing space to a number of countries, including Pakistan, he said.

He said the projects under the China-Pakistan Economic Corridor, an important pilot project of the BRI, progressed steadily during the Covid-19 pandemic, adding that the projects also helped generate employments and were a great relief in the hardest of times.

During the pandemic, Pakistan and China have enhanced cooperation in the field of agriculture, science and technology and energy. Also, work on special economic zones under CPEC is in full swing to promote industrialisation in Pakistan and boost the national economy, he said.

The economist said that the BRI has been helping to bridge the worldwide infrastructure investment gap. “The world is facing severe challenges to meet the investment for infrastructure development which can hinder economic growth worldwide […] in the context, the BRI investments are helping countries to bridge that gap.”

Ramay said that China has been trying to create new economic opportunities globally, adding that the Regional Comprehensive Economic Partnership agreement signed among its 15 participating countries including China, will provide solid economic growth to the world.

The expert believes that global economic recovery is not possible with the mentality of unilateralism or the “ourselves first” approach as being adopted by some developed countries.

“Rich countries should assist poor countries in containing the pandemic by timely providing vaccine, pooling the resources and working on deeper integration, which will also be ultimately favourable for the developed world through the creation of a market for their products,” Ramay said.

He said that Covid-19 vaccines should be declared as a global public good to fight against the common enemy, and China has been working determinedly in this direction.

“China has donated vaccines to many countries, and it is supplying vaccines at the concessional rates as it is the best instrument against the deadly virus […] vaccinated people can come back to their jobs and play their part in economic prosperity,” he said.

However, Ramay said that despite all the efforts, a few so-called rich Western countries are creating hurdles for China out of their hegemonic thinking and zero-sum Cold-War mentality.

“Instead of concentrating on the most pressing challenges like Covid-19 and world economy, they are bent to baseless criticism and focusing on how to contain China. These countries even dubbed the Chinese vaccine assistance to needy countries as vaccine diplomacy,” he said.

Yet, ignoring all the negative propaganda, China is making every effort to turn the ongoing challenges into opportunities for everyone to forge a prosperous world on sustainable development principles, he added.

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Xi declares “complete victory” in eradicating absolute poverty in China

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BEIJING, China (Desk) – Chinese President Xi Jinping announced on Thursday that China has scored a “complete victory” in its fight against poverty.

Xi, also general secretary of the Communist Party of China Central Committee and chairman of the Central Military Commission, said absolute poverty has been eradicated in the world’s most populous country.

Xi made the announcement while addressing a grand gathering held in Beijing to mark the country’s accomplishments in poverty alleviation and honor its model poverty fighters.

Over the past eight years, the final 98.99 million impoverished rural residents living under the current poverty line have all been lifted out of poverty. All the 832 impoverished counties and 128,000 impoverished villages have been removed from the poverty list.

Since the launch of the reform and opening up in the late 1970s, 770 million impoverished rural residents have shaken off poverty when calculated in accordance with China’s current poverty line.

China has contributed more than 70 percent of global poverty reduction over the same period.

With such achievements, China has created another “miracle” that will “go down in history,” Xi said

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Timeline: China’s fight against poverty

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Beijing, China (Xinhua) – Eliminating poverty, improving people’s livelihoods, and realizing common prosperity are the essential requirements of socialism.
Since the 18th Communist Party of China (CPC) National Congress, the CPC Central Committee, with Comrade Xi Jinping at the core, has placed poverty alleviation in a prominent position, put forward new thoughts and ideas, and made new decisions and arrangements to advance China’s poverty relief campaign.
Here is a look at China’s efforts to fight poverty.
— December 2012
During his visit to impoverished villages in north China’s Fuping County, Chinese President Xi Jinping said the most arduous and heavy task facing China in completing the building of a moderately prosperous society is in the rural areas, especially the poverty-stricken regions.
— March 2013
While joining deputies in panel discussions at the annual session of the National People’s Congress, Xi said poverty alleviation should not be like “killing fleas with a hand-grenade” or resort to indiscriminate measures. The poor population should be accurately identified, assisted and managed.
— November 2013
During an inspection tour in central China’s Hunan Province, Xi visited Shibadong, a Miao minority village labeled “poor” at the time, where he put forward the concept of “targeted poverty alleviation.” The term refers to measures that include a system to keep track of every household and individual in poverty to verify that their treatment is having the desired effect.
— April 2014
The State Council Leading Group Office of Poverty Alleviation and Development issued a work plan on the registration of the poor population, mobilizing millions of grassroots cadres across the country to carry out poverty identification. During the process, 128,000 villages, 29.32 million households, and 89.62 million people were identified as poor, according to national standards and procedures on poverty reduction. A database was established for every single impoverished person.
— October 2014
China observed the first National Poverty Relief Day on Oct. 17.
— January 2015
Xi said no single ethnic minority group should be left behind in the country’s building of a moderately prosperous society in all respects.
— February 2015
During a meeting with Party chiefs of 24 counties and cities from Shaanxi and Gansu provinces and Ningxia Hui Autonomous Region, Xi said a well-off society is incomplete if people in old revolutionary base areas cannot shake off poverty.
— October 2015
Xi delivered a keynote speech at the opening ceremony of the 2015 Global Poverty Reduction and Development Forum, saying that China has lifted more than 600 million people out of poverty in the past 30 years, and China was the first developing country to meet the Millennium Development Goals (MDGs) target of reducing the population living in poverty by half ahead of the 2015 deadline.
While striving to reduce poverty at home, China has also actively supported the cause in other developing countries. Over the past 60 years, China has provided 166 countries and international organizations with nearly 400 billion yuan in assistance.
— November 2015
Xi led a conference on poverty alleviation and development. The conference, attended by senior leaders of the CPC Central Committee and the central government, and major provincial-level officials, was the first such high-level meeting ever held at the time. Officials made a “soldiers’ pledge” to the central leadership.
— February 2016
During a trip to Shenshan Village, a poverty-stricken village in the city of Jinggangshan, in Jiangxi Province, Xi met with villagers and the village party chief to learn about the progress that had been made in poverty relief through “precision” measures.
“Not a single family living in poverty is to be left behind on our path to combating poverty,” Xi told the Shenshan villagers.
— July 2016
Xi urged developed regions in the east to help their partner regions in the west better fight poverty at a national conference on poverty alleviation through east-west cooperation in Yinchuan, capital city of China’s Ningxia Hui Autonomous Region.
— August 2016
During an inspection tour to Qinghai Province, Xi said relocation is an effective way to relieve poverty, and stressed the importance of listening to what the villagers want and letting them participate in planning their new villages.
Xi said that the building of new villages should be integrated with measures to promote production and employment, improve basic public services and protect ethnic, regional and cultural features and styles.
— End of 2016
The Shibadong Village, the birthplace of “targeted poverty alleviation,” dropped its “poverty-stricken” label in 2016.
— February 2017
Jinggangshan, the heartland of the early revolutionary activities of the CPC, announced that it had been officially taken off the list of impoverished areas.
— October 2017
The 2017 Global Poverty Reduction and Development Forum kicked off in Beijing. UN Secretary General Antonio Guterres sent a letter of congratulation to the meeting commending China’s poverty-reduction strategy. He said that China had lifted hundreds of millions of people out of poverty and China’s poverty-alleviation experience could provide useful lessons for other developing countries.
— February 2018
The number of rural people living in poverty had dropped from 98.99 million at the end of 2012 to 30.46 million at the end of 2017, and 68.53 million people had been lifted out of poverty in the past five years, a reduction of about 70 percent.
— End of 2018
The Dulong ethnic minority group in China’s Yunnan Province announced that it had been officially taken off the list of impoverished areas in 2018. When answering a letter from the Dulong people, Xi said that “poverty eradication is only the first step, better days are yet to come.”
— May 2019
Yan’an, a former revolutionary base of the CPC, was officially taken off the list of impoverished areas.
— June 2019
Huang Wenxiu, who led the poverty-alleviation efforts in a village in Guangxi Zhuang Autonomous Region, died in a rain-induced flash flood on June 17, 2019, at the age of 30.
Over the past eight years, over 1,500 poverty-alleviation cadres in the country had died in the battle against poverty.
— March 2020
A symposium on securing a decisive victory in poverty alleviation was held in Beijing, the largest of its kind since the 18th CPC National Congress.
— March 2020
The country’s poverty-alleviation tasks were near completion, as the number of impoverished people fell to 5.51 million at the end of 2019, and the poverty headcount ratio was down to 0.6 percent from 10.2 percent during the period.
Of all the 832 nation-level poverty-stricken counties, only 52 remained to be removed from the poverty list.
— May 2020
The registered poor households of the village of Atulieer atop a cliff in Liangshan Yi Autonomous Prefecture, in China’s Sichuan Province, moved to a newly built community.
Since 2016, more than 600 billion yuan had been invested in building new homes for 9.6 million people struggling in extreme poverty.
— May 2020
The Huanjiang Maonan Autonomous County in Guangxi Zhuang Autonomous Region was removed from the country’s impoverished county list.
In an instruction on poverty elimination among the ethnic group, Xi called on the Maonan people to take poverty elimination as a new starting point for a better life, and continue with efforts to make their lives more prosperous.
— October 2020
China’s Tibet Autonomous Region accomplished the historical feat of eradicating absolute poverty. By the end of 2019, Tibet had lifted 628,000 people out of poverty and removed 74 county-level areas from the poverty list.
— October 2020
Xi urged continuous efforts to win a complete victory in the battle against poverty as China marked the seventh National Poverty Relief Day, saying that 2020 was the decisive year for completing the building of a moderately prosperous society in all respects and eradicating poverty nationwide.
— November 2020
China’s Xinjiang Uygur Autonomous Region, with over 25 million people of various ethnic groups, bid farewell to absolute poverty, with the last 10 impoverished counties managing to end absolute poverty.
— November 2020
Xihaigu, once one of the world’s most uninhabitable places due to harsh environment, achieved a historic feat in eliminating absolute poverty, with the last poor county in the region removed from the country’s list of poverty-stricken counties.
— November 2020
China announced that it had removed the remaining 52 impoverished counties from the poverty list, marking the removal of all 832 on the list, a globally significant milestone in poverty reduction for the world’s most populous country.
— December 2020
In a letter of congratulations to the International Forum on Sharing Poverty Reduction Experience held in Beijing, Xi said that the cause of poverty reduction is facing severe challenges as the COVID-19 pandemic rages across the world, and China is willing to work with all countries to promote international poverty reduction and build a community with a shared future for humanity.
— December 2020
While delivering a televised New Year speech to ring in 2021, Xi said China had secured a great historic achievement for fully building a moderately prosperous society in all respects and a decisive victory in poverty eradication.
In 2020, after eight years of efforts, all of China’s nearly 100 million impoverished rural residents living below the current poverty line had shaken off poverty.
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