FT.com

April 30, 2020 by James Kynge in Hong Kong and Sun Yu in Beijing，

China faces wave of calls for debt relief on ‘Belt and Road’ projects.

Bankers will consider suspending interest payments but writing off loans is unlikely.

China has received a wave of applications for debt relief from crisis-hit countries included in the “Belt and Road Initiative” as coronavirus strains the world’s biggest development programme.

Chinese policy advisers and bankers told the Financial Times that Beijing was considering a number of responses, including the suspension of interest payments on loans from the country’s financial institutions. But they also warned against expectations that China would forgive debts outright.

“We understand a lot of countries are looking to renegotiate loan terms,” said a researcher at the China Development Bank, a Chinese “policy bank” that — along with the Export-Import Bank of China — spearheads hundreds of billions of dollars in lending to BRI projects around the world.

“But it takes time to strike a new deal and we cannot even travel abroad right now. The BRI loans are not foreign aid. We need to at least recoup principal and a moderate interest,” said the researcher, who did not want to be named.

“It is OK for 20 per cent of our portfolio projects to have problems,” the researcher added. “But we can’t tolerate half of them going under. We might consider extending loans and giving interest relief. But in general our loans are issued according to market principles.”

The BRI, which was launched in 2013 as the signature foreign policy initiative of President Xi Jinping, is aimed at building infrastructure and boosting China’s influence around the world. Most of the 138 countries that have officially signed up to the BRI are developing nations, many with the weakest credit ratings in the world.

China releases few of the financial details in BRI infrastructure projects. But RWR Advisory, a Washington-based consultancy, estimated that total announced lending by Chinese financial institutions to BRI projects since 2013 was $461bn. Even allowing for the low completion rates of announced projects, such a sum makes the BRI by far the biggest development initiative in the world.

Several of the countries that have applied to Beijing for debt relief are understood to be in Africa, where the Chinese government, banks and contractors have lent $143bn between 2000 and 2017, according to the Johns Hopkins School of Advanced International Studies.

China signed up to a G20 agreement this month to freeze bilateral loan repayments for low-income countries until the end of the year. The G20 initiative said that it covered “all official bilateral creditors”, a definition that appeared to include lending from Chinese policy banks.

However, diplomats said that the process of identifying which loans in which countries would be eligible has only just begun and that negotiations were being undertaken with China on a bilateral basis — handing a great deal of leverage to Beijing.

A policy adviser to the Chinese government, who declined to be identified, said that Beijing’s preferred option in dealing with national requests for debt relief would be to “suspend interest payments” on loans.

However, some borrowers with “good market order” may be allowed to reschedule their loans. Forgiving debt permanently would be a “last option”, the adviser said.