The Daily Update - China's Belt and Road Warning

The IMF’s managing director, Christine Lagarde, used a speech in China to warn Chinese President Xi Jinping against letting China’s belt and road initiative build up unsustainable debt that could be problematic for participants in the future. She also warned that China should be very aware of the environmental cost of the initiative, urging that the whole project should be based on sustainable development.

In her speech at the conference involving global leaders pitching for investment, she stated ‘I have said before that, to be fully successful, the belt and road should only go where it is needed. I would add today that it should only go where it is sustainable, in all aspects’, however she did add ‘The launch of the green investment principle at this conference is a further important step forward for the belt and road initiative – and a step forward for green, low-carbon and climate-resilient investment’. Lagarde believes, that if the initiative is implemented properly ‘Debt sustainability and green sustainability will strengthen belt and road sustainability.’

Lagarde’s speech came as Xi Jinping announced deals worth more than USD64bn at the conference. According to reports, Chinese officials had sought to reassure both those that have already signed up and potential participants that China does not seek to saddle those involved with high debts and wants the initiative to benefit all. A framework on debt sustainability will be established to ‘prevent and resolve debt risk’. Memorandums of understanding have been signed with countries across the globe, from Jamaica and Barbados to Luxembourg and Italy. In his closing remarks, Xi stated ‘More and more friends and partners will join in Belt and Road cooperation’ believing ‘the cooperation will enjoy higher quality and brighter prospects, all of this shows that Belt and Road cooperation is in synch with the times, widely supported, people-centred and beneficial to all’.

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