The CCP’s “Belt and Road Initiative” has encountered bottlenecks abroad. Not only are participating countries increasingly unable to repay their loans, but Chinese infrastructure investors are also under tremendous pressure.
Since 2013, the CCP has spent $1 trillion on the “Belt and Road Initiative,” trying to expand its influence in Asia, Africa, and Latin America by building infrastructure.
China Communications Construction Group (CCCG), one of the key enterprises in the “Belt and Road Initiative,” has recently invested in and operated several infrastructure projects overseas. Still, the group is currently experiencing debt problems.
In addition to developing ports, highways, and high-speed railways, the group’s core business also includes real estate.
Nikkei Asia reported on October 5 that although CCCG is partnering with Beijing to work on overseas infrastructure contracts, it is increasingly dependent on domestic real estate revenue.
From 2017 to 2021, the share of domestic real estate sales in total revenue increased by about six percentage points to about 14%. Meanwhile, overseas revenue fell from a peak of 24% to 13%.
The credit crisis in the domestic real estate industry has hit CCCG hard. The group’s debt has skyrocketed with the active investment in the CCP’s “One Belt, One Road” policy.
By June, CCCG’s total debt had more than doubled in five years to about $256 billion (1.84 trillion yuan). In addition, the real estate giant Evergrande, on the verge of bankruptcy due to a debt crisis, had a debt of $2 trillion last June.
Li Hengqing, an economic scholar in the United States, said: “Real estate shrinks, the water has receded, now anyone who is swimming without clothes can be seen. CCCG is no exception, it will eventually be plagued by a heavy debt load, which is not surprising. Of course, this will certainly affect its other businesses.”
CCCG plans to invest about $39 billion in 2022, up 3% year-on-year. However, the China Chengxin Credit Rating Group said that CCCG might need to reschedule new projects to tackle its growing debt.
In September, the CCCG also announced a new road project in Rwanda and a port reclamation project in the Bahamas, but there are doubts about the profitability of these projects.
Currently, CCCG’s share price has decreased by about 35% compared to February.
Li Hengqing said that as a business with a political mission, CCCG must invest in the “Belt and Road Initiative” to keep its “umbrella hat.”
He said: “How will CCCG face its shareholders? This mistake is related to the Belt and Road policy, which we probably will see in the next few years. Each unfinished project of the Belt and Road is similar to the unfinished works of domestic real estate. The problems will increase and eventually might explode.”
On the other hand, the recession of the global economy, along with factors such as high-interest rates and inflation, have made the borrower’s inability to repay increasingly serious, and many development projects have been stagnant.
The outside world also accuses the CCP of its increasing harnessing of “debt trap diplomacy.”
The CCCG’s development of the Hambantota port in Sri Lanka is a typical representation of the CCP’s “debt trap diplomacy.”
In 2017, the Sri Lankan government was forced to hand over the Hambantota port to the CCP due to its inability to repay the debt on time. As a result, in July this year, Sri Lanka declared the country bankrupt, and massive protests broke out among the masses.
Zheng Xuguang, an economic scholar in the United States, said: “All the participants (in the Belt and Road Initiative) are likely to have problems, whether the recipients or the lenders, no one can escape. I think it could be money laundering, which means there are a lot of big projects, but real projects may not cost much money. The money has been laundered.”
The CCP’s “Belt and Road Initiative” has become a dilemma.