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CGD in the News

December 31, 2018

Are the wheels coming off China's Belt and Road megaproject? (CNN)

From the article:

Many countries that were initially willing to take Beijing's money have expressed concern over what could happen should they default on debt payments, particularly after the Sri Lanka deal.

Part of the problem stems from Beijing's "ad hoc approach" to settling debt issues, according to a report by the Center for Global Development (CDG), which pointed to a lack of consistency in dealing with defaulting nations. In the past, China has been willing to write off or restructure debts and extend further lines of credit, while at other times it has demanded assets to service the loans.

"Without a guiding multilateral or other framework to define China's approach to debt sustainability problems, we only have anecdotal evidence of ad hoc actions taken by China as the basis for characterizing the country's policy approach," the CDG report said.

This creates significant uncertainty, and forces governments borrowing from China to rely on maintaining strong bilateral ties above all else to ensure future lending policies.

December 28, 2018

From Asia to Africa, China’s “debt-trap diplomacy” was under siege in 2018 (Quartz)

From the article:

On the eve of his first (and only) official visit to Africa, former US Secretary of State Rex Tillerson drew a sharp contrast between US aid and lending in Africa, and China’s—one of many warnings from the US on the topic this year.

“The United States pursues, develops sustainable growth that bolsters institutions, strengthens rule of law, and builds the capacity of African countries to stand on their own two feet,” Tillerson said, speaking at George Mason University ahead of a trip that would take him to Ethiopia, Kenya, Chad, and Nigeria. “This stands in stark contrast to China’s approach, which encourages dependency using opaque contracts, predatory loan practices, and corrupt deals that mire nations in debt and undercut their sovereignty.”

That warning came just days after a report by the Center for Global Development, a US-based research nonprofit, warned that eight countries were at serious risk of above-average debt because of Chinese lending. The only African nation among the eight—Djibouti—is a worrying inclusion for the US, given it’s home to a major US military base, and as of last year, China’s first overseas military base as well. Djibouti government debt went from 50% of GDP (pdf, p. 1) five years ago to over 80% (pdf, p. 14). The US is concerned that like in Sri Lanka, China could eventually take control of a key port in Djibouti.