Distressing debt

How China should handle its bad loans to poor countries

Time to work with Western creditors

HOW BIG is China’s Belt and Road Initiative? It is hard to pin down a number. The programme has been running for nearly a decade, during which time China has financed hundreds of infrastructure projects in dozens of countries. These include railways in Africa, ports in Asia and roads in Latin America. President Xi Jinping has called it the “project of the century”. The lofty rhetoric and opaque numbers fuelled fears that China was trying to reshape the world, by putting itself at the centre.

In one sense, it succeeded. The developing world is suffering a sovereign-debt crisis and China is at the heart of it. Buffeted by the pandemic, inflation and the war in Ukraine, dozens of countries involved in the Belt and Road Initiative are struggling to pay back loans from China and other creditors. Ethiopia and Zambia are among those restructuring their debts; Sri Lanka needs China’s co-operation to do the same; in time, Cambodia, Kenya and Laos may follow. China’s ruthlessly self-interested lending policies share some of the blame. The country must work with other creditors to resolve the crisis.

Such teamwork does not come naturally to China. An early test is Sri Lanka, where it has provided cash for ambitious projects. Some of these endeavours, such as big roads and…