G-7 leaders to tackle Beijing debt trap diplomacy
On June 13, the leaders of the world’s seven richest countries agreed to counter Beijing’s growing influence in developing countries through its controversial development agenda, the Belt and Road Initiative, which has left many poor countries heavily in debt.
Advanced economies have pledged to provide a “democratic alternative” to China’s ambitious agenda to close the infrastructure gap in poor countries, which has been exacerbated by the pandemic.
Following a three-day summit in Cornwall, England, the leaders of the Group of Seven (G-7) issued a statement recognizing “the significant infrastructure needs in low and middle income countries”.
“Reflecting our shared values and vision, we are aiming for a radical change in our approach to infrastructure financing, particularly in terms of infrastructure and quality investments, to strengthen partnerships with developing countries and help meet their needs. infrastructure needs, ”the statement said.
The new initiative, called Build Back Better World, or B3W, will help finance bridges, ports, roads and other infrastructure projects in developing countries. It will apply “transparent, open, economically efficient, fair and competitive standards for loans and purchases.” It will also mobilize private sector capital and expertise.
The goal is to help meet the infrastructure needs of more than $ 40 trillion in the developing world, according to President Joe Biden.
“The point is, what is happening is that China has this Belt and Road initiative, and we believe there is a much more equitable way to meet the needs of countries around the world,” said Biden on June 13 at a press conference after the summit concluded.
Since its launch in 2013, the Belt and Road Initiative (BRI, also known as One Belt, One Road) has poured billions of dollars into emerging countries to help build massive infrastructure projects. The initiative, however, was seen as a “debt trap,” increasing the risk of economic distress in borrowing countries due to unsustainable loan levels and opaque contracts.
The G-7 initiative “will be good for the whole world and will represent values that our democracies represent, not a lack of autocratic values,” Biden said.
G-7 leaders have agreed to form a committee that will work on the details of the global infrastructure initiative, Biden said.
The plan is to fund development projects in four key areas: climate, health, digital technology and gender equity.
The G-7 countries also reiterated their calls to support the poorest nations as they continue to face major debt crises. These countries face inequalities in terms of access to credit markets and have growing budget deficits.
Since the start of the pandemic, the World Bank and the International Monetary Fund (IMF) have urged the world’s 20 richest economies (G-20), including China, to temporarily suspend debt service payments to countries poorest people in the world to avoid a debt crisis.
Low-income countries will need around $ 200 billion to fight the pandemic and $ 250 billion in capital spending over the next four years, according to the summit statement that cites IMF estimates.
China is the world’s largest creditor, accounting for nearly 65% of official bilateral debt. While China and other countries have agreed to provide debt relief to countries in financial difficulty, Beijing’s opaque lending practices complicate these relief efforts.
“We support fair and open lending practices and call on all creditors to respect them,” the statement said.
Most of the BRI’s projects are funded primarily by a wide range of local and state-controlled institutions.
A study by AidData, a US research lab at the College of William and Mary, found that China’s loan contracts with emerging countries include secrecy provisions, collateral agreements, and debt renegotiation restrictions. uncommon.
The researchers analyzed the legal terms of 100 Chinese loan contracts to 24 developing countries, many of which participated in the BIS. They conducted an in-depth review over a 36-month period and found that China’s loan contracts contained unusual confidentiality clauses that prevented borrowing countries from disclosing the terms or sometimes even the existence of the loan contracts.
The study also found that the contracts contained provisions placing Chinese public lenders as senior creditors whose loans were to be repaid on a priority basis. Informal collateral agreements put Chinese creditors at the top of the repayment line.
Additionally, Chinese lenders were given the freedom to terminate loans or speed up repayment if they disagreed with a borrowing country’s policies.
China’s debt trap diplomacy has also allowed Beijing to expand its human rights abuses. There is an increase in the harassment of Chinese dissidents abroad. China has also used its economic and political influence to silence critics in developing countries.
The BRI encompasses 139 countries, including China. These countries represent 40 percent of the global economy and 63 percent of the world’s population, according to the Council on Foreign Relations.
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