March 15, 2018
From the article:
Chinese officials have been adept at ascribing a vision for the “Belt and Road” initiative (BRI) that garners support from a wide array of countries, as well as international institutions like the World Bank and International Monetary Fund (IMF).
The appeal is simple. China is offering to mobilize trillions of dollars in capital for something that all countries, rich and poor, crave: infrastructure. But as the vision moves to implementation, the Chinese government and its BRI partners would do well to address its key vulnerabilities.
High on the list is China’s go-it-alone approach to managing debt problems, evident in high-profile cases like Venezuela and in lesser-known situations like Sri Lanka and Tajikistan. The World Bank and other international institutions, which seek to lend their names to the BRI, have an obligation on behalf of their member countries to press the Chinese on a legacy of opaque and ad hoc debt workout arrangements.
These arrangements often prove to be a bad deal for distressed borrowers and are misaligned with global development objectives, which are pinned on principles of transparency and sustainability. For the Chinese themselves, unilateralism on debt is increasingly problematic.
Not only does it contribute to a political backlash in debtor countries, it makes Chinese financial interests increasingly vulnerable in the absence of the kinds of protections afforded to Paris Club creditors. In fact, this club of rich-country lenders was formed not to look out for the interests of debtors but to use collective action to ensure repayment from recalcitrant borrowers.