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Proportion of Chinese loans to the foreign debt is far from the threshold of warning

By Yu Hong

This year marks the 40th anniversary of China’s reform and opening up. China’s reform and opening up, which was launched in 1978, has brought constant changes to the historical process of China and the world in terms of scale and content. After 40 years’ hard work, China’s GDP has grown from 364.5 billion Chinese Yuan in 1978 to 82.7 trillion Chinese Yuan in 2017; per capita GDP has grown from 385 Chinese Yuan in 1978 to 59660 Chinese Yuan in 2017, with an average annual growth rate of 9.5%. We have built the world’s largest highway network, high-speed railway network and mobile broadband network. China has become an important engine for the stable recovery of the world economy with its contribution of more than 30% to the world economic growth.

An important experience in China’s development is to improve the business environment and attract foreign investment. In the past, preferential policies were made to attract foreign investment, but now we need do more to improve the investment environment. This year, the Chinese government declared dozens of policies in terms of investment freedom, investment convenience, investment promotion, investment protection, etc., striving to create a fair, transparent, convenient and attractive investment environment in order to promote economic development with high quality through effective use of foreign capital. The World Bank’s survey found that it takes only 9 days to start a business in China, and the time to resolve commercial disputes is short and the cost is low. According to the World Bank’s Doing Business Report 2019, China ranks 46th in 190 countries and regions, jumped 32 places from last year. In the first half of 2018, with global foreign direct investment falling sharply by 41%, China attracted foreign direct investment of USD 70 billion, up 6% year-on-year, ranking first in the world for foreign direct investment inflows. These investments created employment for China, increased domestic production, and introduced advanced technology and management experience, promoted the upgrading of China’s industrial structure, playing an important role in promoting China’s economic and social development.

Under the leadership of the Communist Party of China, we have blazed a development path in line with China’s reality on self-reliance and arduous struggle of the Chinese people and with continuous reform and opening up. China has continuously open to the outside world, not only developing itself, but also benefiting the world. China will never close its door to the world and will continue to open further to carry out mutually beneficial cooperation. The China International Import Expo, which was just held in Shanghai, is the world’s first national-level exhibition with the theme of importation. It reflects China’s consistent position in supporting the multilateral trading system and promoting the development of free trade. It is China’s practical actions to promote the open world economy and economic globalization.

This year marks the 5th anniversary of the BRI. BRI has become the largest international cooperation platform. Although the theme of this seminar is about trade, investment and connectivity, I want to emphasize that the connectivity of policy, infrastructure, trade finance and people constitute the whole content of the BRI. It has been proven by practice of the past five years that the five pillars are mutually supportive and that only by coordinating the cooperation in all five areas, can the greatest advantage of the BRI be realized. On both promotion and evaluation of BRI’s effect, it will be more comprehensive and effective if we adopt a sound approach with all five pillars into consideration. Through five-year practice, we should better understand the significance of the principles of achieving shared growth through discussion and collaboration as well as openness and transparency to promote the BRI cooperation, and more clearly and firmly adhere to the rules of international law and pursue environmental protection and sustainable development.

South Asia is an important partner for promotion of the BRI. In order to promote economic and trade cooperation between China and South Asia, China has used high-quality platforms such as the China Tibet Tourism and Culture Expo, the Western China International Fair, the China-South Asia Expo, and the Lanzhou Investment and Trade Fair to deepen cooperation in various fields, especially under the framework of the BRI and achieved fruitful results. From this year, China International Import Expo has become the most important platform. The BRI has received positive response and support in South Asia, expanding new space for the growth of China and South Asian countries. The economic and trade cooperation between China and South Asian countries has maintained a strong momentum in recent years. In 2017, the total trade volume between China and South Asia reached 127.18 billion USD with an increase of 63.1% from 2013 when BRI was initiated. Chinese companies have invested rapidly in South Asian countries, with direct investment in South Asia reaching 1.7 billion USD. China has become one of the important sources of foreign investment in South Asian countries. China’s cooperation with South Asian countries has encouraged investment and cooperation from other countries with South Asia which has a positive impact on the development of South Asia.

While the BRI has made positive progress, there are also some noises intending to undermine our cooperation, such as the so-called “China debt trap” that some media are playing up. In fact, the proportion of Chinese loans to the foreign debt of the concerned countries is far from the threshold of warning. According to statistics from Sri Lanka’s central bank, Chinese loans only accounted for around 10% of its foreign debts in 2017, of which 61.5% is preferential loans whose interest rates are below that of the international market. Sri Lanka’s main debt burden is not caused by China’s loans. According to the Pakistani government’s statistics, 42% of Pakistan’s debts are loans from multilateral institutions, and Chinese loans merely account for 10%. The rate of preferential loans from China is relatively low compared with others. From 2000 to 2016, China’s loans only accounted for 1.8% of Africa’s foreign debts, and most of them are offered to infrastructure projects. There is no complaints from China’s cooperation partners for being trapped in debt crisis because of China. On the contrary, many countries’ leaders give praise for China’s investment and financing cooperation and are looking forward to greater cooperation with China in this respect. The “Belt and Road Initiative” has no geopolitical aims. It does not target anyone, nor excludes anyone, nor builds a small circle, nor it is a “trap”. On the contrary, it is a bright future where China and the world share opportunities and seek common development.

China and South Asia are the regions with the most developmental dynamism and growth potential, and the prospects for cooperation between us are bright. China is willing to further coordinate its economic development strategy with South Asian countries, closely integrate China’s advantageous industries with South Asian countries’ development needs, and promote the development of cooperation between China and South Asia to enter a new phase. It is high time that China and South Asia jointly build the BRI into a bright future.

We hope that South Asian countries will also work with China to strengthen communication and exchanges, promote the connectivity of policy, infrastructure, trade finance and people in a comprehensive and balanced manner under the framework of the BRI to achieve mutual benefit and win-win results. I also hope that the scholars here could have in-depth discussion on relevant issues and contribute their wisdom to our common development.

I will finish my tenure and return to China next month. During my two years tenure in Nepal, I witnessed the successful holdings of all three-tier elections in Nepal, the establishment of a government with two-thirds majority in federal parliament, and the establishment of a federal system. I also saw that China-Nepal relations have shown strong development momentum in the past two years, with encouraging and increasing cooperation in various fields, frequent high-level exchanges and signing of a series of important documents. The relationship between the two countries has been strongly developed. I sincerely thank all the friends who care about and support China-Nepal relations, the development of China-South Asia relations. Thanks for your friendship and support.

(Excerpts of the speech delivered by Chinese Ambassador Ms. Yu Hong at a seminar on “China’s Belt and Road Initiative in South Asia and Nepal: Trade, Investment and Connectivity Dynamics” on 18 November.)

 

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