قالب وردپرس درنا توس
Home / Business / As the trade war breaks out, China is slowing down its global rule dream

As the trade war breaks out, China is slowing down its global rule dream



By Keith Bradsher

China has spent nearly five years developing a steady stream of hundreds of billions of dollars into a bold plan to gain greater global influence by financing large projects in Asia, Eastern Europe and Africa ,

Now Beijing is starting to tap the brakes.

The value of deals that Chinese companies are achieving as part of the country's grand global plan – the so-called Belt and Road Initiative – is, according to new data, less than a year ago. The Chinese officials themselves are cautious and express concern that Chinese institutions must be careful about how much they lend under the program – and ensure that their international borrowers can repay it.

"Current international conditions are very uncertain, with many economic risks and large fluctuations in interest rates in newly emerging markets," said Hu Xiaolian, the chairman of China's export-import bank, a state-controlled lender who plays one big role in financing the projects, at a forum this month in Shanghai. "Our companies and the Belt and Road Initiative countries will face financing difficulties."

China has begun a comprehensive, interinstitutional review of how many deals have been made, on what financial terms and with which countries, say people close to Chinese economic policy, who have asked for anonymity efforts, have not been released.

American and European officials have long feared that the Belt and the Road represent Beijing's diplomatic and economic take-over, fueled by its enormous wealth of government and supported by the laser-like focus of the Communist Party on achieving long-term goals.

Under the initiative, Chinese government-controlled lenders offer large portions of the money ̵

1; usually through loans or financial guarantees – to other countries to build large infrastructure projects such as highways, railways and power plants. This money is often associated with the requirement that Chinese companies are heavily involved in planning and construction and do a lot of business.

But even with its financial firepower, China has its limitations. Its economy is showing signs of slowing and is in the middle of a trade war with the United States. Beijing is struggling to get a grip on debt problems – problems that international lending certainly did not help.

With too much overseas activity, there is a risk of creating lavish white elephants that can bring Chinese companies and local partners alike to their knees. All kinds of deals now want to be associated with the Belt and Road Initiative, such as a theme park in Indonesia and a brewery in the Czech Republic.

In addition, lavish lending can worsen relationships with other countries rather than helping them. New governments in countries like Malaysia and Sri Lanka have wondered why their predecessors borrowed so much from Beijing.

This year, some Chinese officials expressed concerns about lending under the program.

"Securing debt sustainability – that's very important," said Yi Gang, the new governor of the Chinese central bank, at a conference in Beijing in late April.

While belt and road activities are still huge, official figures have certainly made them more restrained. In the first five months of 2018, Chinese companies signed contracts worth $ 36.2 billion, nearly 6 percent down on the year-ago period.

The contract signatures at this time last year were also declining from 2016, albeit to a lesser extent. Much of this downturn was due to large companies and governments saving their powders for a major Belt and Road forum in Beijing in May 2017, which was attended by Xi Jinping, China's top politician, Russian President Vladimir Putin and other key politicians , After the forum, the activity increased.

"I sensed that the enthusiasm over BRI has certainly dropped a few points from last year," said Eswar Prasad, a Cornell economist and former head of the China Department of the International Monetary Fund, who recently visited Beijing with Chinese financial politicians.

The project activity could, of course, be resumed later this year. But an uncertain global outlook has given Beijing even more reasons to be cautious.

A protracted trade war between the United States and other countries, notably China, could shake confidence and slow growth. The United States has pushed up short-term interest rates, making it more expensive to borrow money. In the past, interest rate hikes in the US have sometimes led to financial turbulence, especially in emerging markets.

Loan and loan lending seemed to be a safe bet when efforts under Xi began in 2013. The loans would be long-term and give borrowers time to repay them. China also tends to lend mainly to countries with significant natural resources. If a resource-rich developing country had difficulty repaying its loans, it could instead offer goods like oil, iron ore, or even food.

But part of the problem now is that no one, not even the Chinese government, has a full picture of lending. The Ministry of Finance and the state-controlled banking system have put money into projects from the Czech Republic to Laos and from South Africa to Kazakhstan. The China Banking and Insurance Supervisor estimated this spring that Chinese banks had provided $ 20,000 billion for 2,600 projects.

Various government agencies have issued extensive export guarantees, loan guarantees and other financial arrangements under the initiative, although some of them overlap with bank loans.

A slowing down of belt and road can also be natural. Official data show that Chinese companies are completing their projects at almost the same pace as they sign contracts for new contracts, suggesting that the initiative may be entering a sustainable rhythm.

"They are still very active in Belt and Road," said Andrew Mackenzie, managing director of BHP Billiton, an Australian mining giant that is one of the largest exporters of iron ore for Chinese steelmills to belt and road.

Nevertheless, some Chinese officials are looking more closely at where the money ends up.

For example, they re-evaluated the country's financial commitment in Africa, a continent of immense natural resources that has attracted a wide range of Chinese energy and construction companies, people close to Chinese politics said.

Belt and Road has been increasingly skeptical of multilateral institutions. They warned that developing countries should not have excessive debt.

"The first priority," said Christine Lagarde, managing director of the International Monetary Fund at the Beijing Conference in April, "is that belt and road travel only where it is really needed."


Source link