Beijing : Economists have warned that Chinese President Xi Jinping’s ambitious ‘One Belt One Road’ Project is posing a danger to the global financial system. Government banks of China are trying to raise funds to be issued as loans to the deprived and potentially dangerous countries. Economist Xu Chenggang and Bjorn Conrad have raised their concern that if these countries fail to repay the loans, it would greatly impact China’s banking sector and the effect would be seen on the global economy as well.
Recently, International Monetary Fund (IMF) warned China of its dangerous level of debts and lending which poses a danger of financial turmoil. Few Chinese economists have an opinion in sync with IMF views. In such circumstances the warning issued for the ‘One Belt One Road’ Project seems to be noteworthy.
The leading banks in China like the Bank of China, China Construction Bank, Industrial and Commercial Bank of China and Agricultural Bank of China are putting efforts to raise funds for ‘One Belt One Road’ Project as per sources. The Chinese Government plans to spend one trillion dollars for this project. A major part of these funds are allocated for lending loans to finance projects in other countries.
Under the ‘One Belt One Road’ project, China is engaging in more than 100 projects across 60 countries in Asia, Europe and Africa. Many countries in Asia and Africa which are economically weaker and politically unstable are included in the ‘One Belt, One Road’ project. Bjorn Conrad, Vice President at the Mercator Institute for China studies has warned potential risk of ‘Bad Loans’ and its impact that China is exposing itself. This would severely impact not only China but also the global financial system.
Professor Xu Chenggang has also expressed similar view. He said that in the last ten years, the private investment has slowed down and the country is challenged with issues of overcapacity and non-performing business units. Xu further added that current economic challenges could also be the reason for the ‘One Belt One Road’ initiative.
Last year China debt to its GDP was alarming 235%, which is feared to surpass 300% in next five years. With this background, China ambition of ‘One Belt One Road’ project and the debt certainly possess a danger to China and global economy.