Debt risk observation in the “Belt and Road” project
Debt risk observation in the “Belt and Road” project
Former Vice President of Bank of China, Zhang Yanling, Senior Research Fellow, Chongyang Financial Research Institute, Renmin University of China (excerpt)
Zhang Yanling: Today, many foreign friends have discussed together. I have used a lot of photos, and all of them are my own experiences of the “Belt and Road” project. The “Belt and Road” advocates the community consciousness of power and responsibility, and provides a new ideological plan for improving the reform of the global governance system.
1 Turkish cement project China's EPC model is changing
Limak, Turkey's largest construction conglomerate. The photo is a Sinopec overseas project of China National Building Materials as a general contractor of a 5,000-ton European-standard cement plant. We visited their owners. The project has been completed on schedule, and the formal production has been completed for half a year. All recovered. At present, only the release of the quality guarantee is pending.
I will tell you about the characteristics of this project, because the future projects may be like this, because everyone knows that many of the “One Belt, One Road” projects are contracted by China, which is EPC. In the stage of E, we cooperate with European companies in design, and design one piece. In the stage of purchasing P, we look at the equipment written in “China Building Materials”. The main equipment is ours, but some electronic equipment is also Coming from Europe. In terms of C, in terms of construction, we basically let the local owners do it. A change has taken place in EPC. We are now EPC+F, plus financing, which is funded by China Exim Bank. The Export-Import Bank is doing buyer credit, the project is completed, and the money is fully recovered.
The owner's operation and operation team is from Germany. He told me that China's EPC level is very good, China's equipment is good, and China's design is also in place. The overall feeling is that it is very recognized for our project. Even if there are some problems in the operation, they will be dealt with immediately. Therefore, the owners are very satisfied.
In the three stages of the EPC, China is doing differently from the past EPCs. It is done in a developed country. The procurement is also imported from the West. C is mainly used locally, supporting local employment and local economy. development of. At the same time, they are now operating with German companies, they are very, very strict. After we got there, it was safe to talk for a long time, armed from head to toe, even the socks were replaced with its shoes and socks, the management was very strict, and the evaluation was very high.
The “Belt and Road Initiative” has had the following effects on the world economic structure: First, the proponents and participants have changed, second, the region of economic development has changed, third, the mode of cooperation has changed, and fourth, the concept of economic development has changed.
2 Japan’s “One Belt, One Road”
Japan's "Belt and Road" research center. Japan joined the “Belt and Road Initiative” initiative. It has just set up its first research center and then came to Beijing. The research center described the “Belt and Road” from five aspects: First, from the perspective of scale, building such a huge economic circle has great potential for the future of Japan; second, from the diplomatic situation See, the “Belt and Road” concept has subverted the previous diplomatic model based on military expansion and crisis management, aiming to create a win-win partnership for the 21st century economy and society; third, the areas involved; and fourth, from the perspective of policy instruments, The “One Belt, One Road” concept is based on the cooperation of transcending national borders and aims to maximize the benefits of regional cooperation. Fifth, from the perspective of policy, the central idea of “One Belt, One Road” is to build a multi-symbiosis of sustainable development. The global environment, the goal is to solve the problems faced by developing countries in many aspects such as poverty and terrorism. He also concluded that from the above characteristics, the “One Belt, One Road” concept has broken the world structure constructed in Europe and the United States in modern times and provided feasibility for solving new challenges in the new era. His analysis is still representative.
3 Egyptian Boulders Project
The Egyptian government regards it as the most successful model for attracting investment.
This project broke several records: one is China's speed, and plans to build a 200,000-ton fiberglass production base in three batches in 8-10 years. Now it has been completed in three phases, and it took less than six years. This is The speed of the “Belt and Road” has taken advantage of the “One Belt, One Road” and the production has been particularly smooth. The second is China's technology. This project is China's largest fiberglass production line overseas. All technologies are independently developed by China. Third, it fills the gap in fiberglass manufacturing in technology-intensive industries in the Middle East and North Africa. Fourth, create foreign exchange for Egypt. When the first production line first came out, it earned more than 200 million US dollars for Egypt, and at the same time drove the development of upstream and downstream mineral resources and processing industry. Fifth, for the benefit of the local people, more than 2,000 jobs have been created. More than 66% of the company's middle managers are localized, and 99% of frontline employees are localized. The sixth is to promote the cultural integration of the people.
4 Azerbaijan's Caucasus Pearl
It was accused of dumping excess capacity and pollution projects along the line.
In fact, this project is known as the Alaska's Caucasus Pearl. The Caucasus project has also been handed over and has been in production for a long time. The project was completed in July 2014 with a daily output of 5,000 tons of cement. This is Azerbaijan's largest modernized cement plant. Its commissioning has transformed the country from a cement importing country into a cement exporting country. The annual import savings are US$150 million, which has solved the employment of 400 people. At the same time, 2,500 jobs were created in related chemical, transportation, and fuel industries.
Excess capacity transfer and debt risk?
Cement is indeed a surplus industry in China, and it is not necessarily in other countries. China's cement equipment industry ranks first in the world and the best in the world. China's other aspects of paving, bridging, shipbuilding, high-speed rail, etc., the technical content is even higher.
What we have to worry about is the other side of the problem: what if the relevant countries can't afford the debt? Because the debt trap theory sounds harsh, it also points to the reality that some countries owe China's debt, which accounts for a high proportion of their total GDP. These countries have the risk of not being able to repay their debts as scheduled. However, this issue should not be a target for Western countries to attack us, but should be an important reference factor for China and host countries in studying the feasibility of related projects.
Currently, the “Belt and Road” project is vulnerable to attack, in addition to some imperfections in the project itself, and is also associated with the operational characteristics of the relevant project. Major infrastructure projects have a long investment cycle. From negotiation, construction, operation, profitability to investment recovery, it often takes decades. The two stages of negotiation and construction are often stages in which various contradictions and negative factors are easily concentrated. Because the debt has been created, the environment has been destroyed, but the corresponding benefits and job opportunities have not yet arrived. After entering the operational phase, the positive impact of related projects will begin to emerge. The domestic political environment of some host countries is affected by cyclical factors such as elections, and it is easy to speculate on the negative aspects of the “Belt and Road” project because of political issues. This is both a problem for China and a problem for the host country. This requires an objective and rational understanding of China, the host country and the international community.
Debt risk issues, including developed countries, in any country, your infrastructure is built to borrow money. Historically, the world is the same. Second, for the vast number of developing countries, their debt development is very difficult, and even some countries have no way to borrow. Very poor countries have limited access to international capital markets. Their different economic structures and public sector may mean that debt will affect the growth of both groups. Furthermore, donor assistance to low-income countries can mitigate any negative impact that debt-servicing obligations may have on their economic activities. So far, the investment area of the “Belt and Road” project is infrastructure, which is an investment debt, which forms a valid asset rather than a consumption-type debt. Finally, the current investment attraction project was decided by the host government and the people. The investor will also conduct a full feasibility study on the project before the investment. The reminder from the developed countries will help the project country to strengthen the comprehensive economic benefits of the project. Do a good job to avoid the risk of debt.
Reasonable distribution of discourse power is the basic appeal of the global governance system. Objective, true, and not biased.
Zhang Yanling proposed: First, enhance the recognition of the high-quality level of investment projects by all parties involved in the construction of the “Belt and Road” and jointly create conditions to ensure high-quality development. The second is to establish an ecological environment with high-quality development of “One Belt, One Road”, including rules and regulations on legal system construction, financial support, risk management and control, asset preservation and value protection, and personal safety protection. Third, each company must be responsible for its own projects and ensure the high-quality construction and operation of the project.