Here’s why China’s ‘Belt and Road’ initiative is risky, think tanker says

Yasin Bulbul | Anadolu Agency | Getty Images

Chinese President Xi Jinping, Russia’s President Vladimir Putin, Turkish President Recep Tayyip Erdogan and other national leaders pose for a photo after the Belt and Road Forum at the China National Convention Center in Beijing, China on May 14, 2017.

“On one hand it will be a way of handling China’s excess capacity and continue to create jobs with investment in China. Secondly, it creates a kind of a zone of influence for China,” he said.

Announced back in 2013, the China’s “new silk road,” as it’s commonly known, aims to connect Asia, Europe, the Middle East and Africa with a vast logistics and transport network.

To date, China has pledged over $100 billion to finance projects under the OBOR initiative, including the $46 billion China-Pakistan corridor and a high-speed railway connecting China and Singapore.

But, there are risks that come with China extending such huge credit lines.

In fact, Fitch Ratings has estimated around $900 billion in credit has been extended to the host countries where the risk of debt default is high like Ethiopia, Kenya and Sri Lanka.

Drawing comparisons to China’s investment in Venezuela, Prestowitz said, “It’s not going to be repaid. It’s a total loss. I can foresee similar development in ‘One Belt, One Road.'”

Some, however, see opportunity in the initiative.