"Hidden Debt of 456 Trillion Won in China’s Belt and Road Participating Countries"

"Free Low-Income Countries from the Debt Trap"

Chinese President Xi Jinping [Photo by AP]

[Asia Economy Reporter Cho Hyun-ui] The total debt of countries that participated in the Belt and Road Initiative (BRI: land and maritime Silk Road) project promoted by Chinese President Xi Jinping and ended up in debt has reached $385 billion (approximately 456 trillion KRW).

On the 29th (local time), a British economic media outlet reported this citing a report from the AidData research institute at the College of William & Mary in the United States.

The BRI project mainly involves underdeveloped countries in Africa and Southeast Asia borrowing capital from the Chinese government to build social overhead capital (SOC) such as roads, railways, and port facilities. However, if they fail to repay the money borrowed from China, the infrastructure built in this way is transferred to China.

The debt of BRI participating countries appears to be greater than previously known. The report stated, "The BRI-related debts of several participating countries have been understated for years," and "the scale of hidden debt is also increasing."

Notably, the entities borrowing funds overseas changed around the time China announced the BRI in 2013. Before 2013, central banks of each country owed debt to China, but afterward, it shifted to state-owned enterprises, state-owned banks, and joint ventures.

Among the participating countries, more than 40 low-income countries have debt to China exceeding 10% of their national gross domestic product (GDP). A representative from the research institute explained, "Most of these debts were not reflected on the balance sheets of the low-income country governments," adding, "The problem is that they are under the legal responsibility of the participating countries. This blurs the line between private and public debt."

Some point out that China is pushing low-income countries into default to seize their assets. The media outlet expressed concern, saying, "China is trapping low-income countries in a debt trap," and "China will ultimately seize the assets of the participating countries."