Zhou Xiaochuan Weighs In on the BRI Debate (Part 1)

China’s former central bank governor explains the dangers of the ‘debt trap’ narrative, the reasoning behind the Belt and Road Initiative, and issues that need to be addressed in its next phase

The author is China’s former central bank governor.

This year marks the 10th anniversary of President Xi Jinping’s proposal for the Belt and Road Initiative (BRI). The BRI has garnered global attention, and there is a host of issues ripe for economic and financial analysis, research, and better design for the future.

I want to focus my analysis on three areas: the so-called “debt trap” narrative, the characteristics and economic logic of China’s global investment and financing, and issues that need to be addressed in the next phase of the BRI.

Don’t ignore the damage of the ‘debt trap’ narrative

In various BRI projects, China’s share of the financing is significant, primarily led by the China Development Bank (CDB) and the Export-Import Bank of China (Ex-Im Bank), as well as other financial institutions, including some commercial banks. Most of the financing comes in the form of traditional loans, mainly for project financing, which typically have long terms. When debt repayment issues arise, there’s a need for restructuring.

The notion of a BRI “debt trap” is greatly misleading. While widely mentioned by international media, the discussions are often uninformed. The “debt trap” narrative has done significant damage to the BRI and its financing.

This narrative has caused some developing countries in Africa to grow skeptical about Chinese projects and financing. The number of new projects financed by the CDB and Ex-Im Bank has dropped significantly. For example, Ex-Im Bank used to finance nearly a hundred new projects each year, now reduced to just over 20 (though this could also be due to the pandemic limiting personal contact and on-site inspections).