Once again, the debt issue of developing countries is among the hot topics of G20 agenda. At the G20 Finance Ministers and Central Bank Governors Meeting held in July at Gandhinagar, Gujarat, the finance ministers of member countries emphasized to solve the debt issue of these countries in an effective, comprehensive and systematic way and promised to strengthen communication within the Common Framework for Debt Treatments, which shed some lights on solving the problem.
Bilateral or multilateral development loans are normal economic practices, which is important for developing countries to alleviate financial pressure and promote economic development. Like other borrowers, sometimes sovereign borrowers might also have difficulties to serve their debts. Rather than pointing finger at the borrowers or lenders, we’d better look into the reasons why those countries have to borrow and why they can’t repay the loans.
We should be soberly aware that the debt issue is essentially a development issue, and the debt crisis is actually an existential crisis for developing countries. The predatory development path of Western countries in the colonial era and the dumping development model of Western countries after World War II destroyed the economic foundation of developing countries, thus completely losing the ability to achieve development by relying on their own natural endowments.
This is the root of the current debt crisis. By clarifying the root reasons, it is obvious that debt reduction and suspension can only achieve temporary relief. To relieve the pain of poverty and backwardness, all projects and financial supports should focus on restoring the development capabilities of the host countries.
In the last decade, China has been helping developing countries improve infrastructures and enhance their development capabilities in two ways. First, by providing preferential loans of low interest rates and long terms without additional political conditions. Second, by accomplishing the projects with higher efficiency in terms of time and financial costs, which further lower the financial burden of the host countries.
Last month, the first modern large-scale sewage treatment plant in Bangladesh, Dasher Gandhi Sewage Treatment Plant, was completed. It is the largest single sewage treatment plant in South Asia and can treat the sewage of 5 million residents of Dhaka. This is another example of how the Belt and Road Initiative benefits partner countries. Since its inception 10 years ago, the BRI has created 420,000 jobs for partner countries and lifted nearly 40 million people out of poverty. According to a World Bank report, by 2030, the BRI will generate an incremental $1.6T income annually among these countries, accounting for 1.3% of global GDP.
Facing the current debt crisis of developing countries, China believe that the main reason is a problem of short-term liquidity, caused by the irresponsible macroeconomic and monetary policies of those who dominate the global financial orders, which will neither affect the long-term potential of these countries, nor our confidence in maintaining cooperation with them.
With these thoughts in mind, in 2020, China actively responded to the G20 debt relief initiative. In that year alone, China postponed more than 1.3 billion US dollars of debt, accounting for nearly 30% of the total contribution of G20 countries.
We sincerely believe that in face of the financial difficulties of developing countries, all creditors, both sovereign, private and multilateral, should act immediately in a results-oriented way and in line with the principle of "joint action and fair burden-sharing", and work innovatively to channel more incremental financial resources in a more efficient and effective way. This year, holding the presidency of G20, India has been pushing consistently for a consensus to address the debt issue. This endeavor deserves high appreciation.
History has proved that free market principle is not enough to solve the problem of unbalanced development, and the so-said “rule-based orders” are origin rather than solution of the debt dilemma suffering developing countries. Address the debt issue is just an initial step for a more inclusive and balanced development. Based upon that, by staying committed to a people-centered approach, we should build a global economy which could benefit everyone, leaving no country and no person behind.
(The writer is Consul General of the Consulate General of the People’s Republic of China in Mumbai)
