China is saddling poor nations with unsustainable debt through large-scale infrastructure projects that are not economically viable, the head of the U.S. Overseas Private Investment Corporation (OPIC) said on Monday.
The criticism of Beijing – targeted by President Donald Trump in a trade war that has sent ripples through economies around the world – comes as Washington seeks to ramp up development finance in the face of China’s global ambitions.
Unveiled in 2013, President Xi Jinping’s “Belt and Road” initiative aims to build an infrastructure network connecting China by land and sea to Southeast Asia, Central Asia, the Middle East, Europe and Africa.
China has pledged $126 billion for the plan, which has been praised by its supporters as a source of vital financing for infrastructure-starved partners in the developing world.
But in an interview with Reuters in Johannesburg, OPIC CEO Ray Washburne warned that the Chinese strategy created a debt trap for many poor nations.
“Just look at any project in these countries and they’re overbuilding the size,” he said. “We try to have countries realise that they’re indebting themselves to the Chinese.”
Washburne is not the first to warn of growing debt linked to Chinese infrastructure projects.
International Monetary Fund Managing Director Christine Lagarde in April cautioned China’s Belt and Road partners against considering the financing as “a free lunch”.
Sri Lanka formally handed over commercial activities in its main southern port in the town of Hambantota to a Chinese company in December as part of a plan to convert $6 billion of loans that Sri Lanka owes China into equity.