Jamil Anderlini: One criticism we've heard from some countries. One thing that people have raised in some areas is the idea of debt. The idea that many of the loans or the investments involved loans from China to these countries may make these countries take on too much debt and they won't be able to fund them, or they won't be able to repay these loans. And one example we hear a lot is the example of Sri Lanka, which seems to borrow too much and is not able to repay and then had to hand over the Hambantota port. What's China's plan to make sure that these governments can pay back the loans that are involved?
Le Yucheng: Debt is a neutral term commonly used in economics. The debt issue we are talking about here is not necessarily linked to the BRI. To start with, the cause for debt is complicated and involves many factors, including economic fundamentals, historical debt baggage, or changing international and economic environment like rising protectionism, interest rates hike in some advanced economies, appreciation of major reserve currencies as well as plummeting commodity prices.
I've been to Equatorial Guinea, a small country in Africa. It used to be a very poor country, and then they discovered oil. Between 1997 and 2007 when the oil price was at its height, the country's GDP grew by over 26% for 10 years in succession with a per capita GDP exceeding US$20,000. However, in recent years, the declining oil price has brought its GDP growth rate into the negative territory, -5.3% in 2017. And the per capita GDP fell to US$8,000. That shows how changes in external economic environment affect these countries. Republic of the Congo faces a similar situation. It has taken on a lot of debt with western oil brokers.
Secondly, China is a latecomer in international investment and financing markets. It's just been five years since the BRI was put forward. And it hasn't been that many years since Chinese companies started to explore the global market. So one should not hold China accountable for all the debts.
You mentioned Sri Lanka. I have followed the situation in Sri Lanka closely. According to the 2017 annual report issued by its central bank, Sri Lanka's total foreign debt is over US$50 billion. China only accounts for about 10%. Plus, over 60% of Chinese loans are concessional loans, with an interest rate much lower than the international level.
Sri Lanka has issued a lot of sovereign bonds to attract American and Western investors. So government financing constitutes a major source of market lending, which takes up 39% of the total external debt. The country has also borrowed from other sources, the ADB 14%, Japan 12%, and the World Bank 11%. China only accounts for about 10%.
About the Hambantota port, the project was built and run at the request of the Sri Lankan side. For years, Sri Lanka had hoped to make good use of its geographical location and build the country into a logistic and warehouse hub in the Indian ocean. In the past, because of civil war and conflict, they were unable to do so. Now the situation is stable, to build an international port is back on their agenda. And they looked for help from China.
The idea of the operation right also came from the Sri Lankan side. The Chinese company was hesitant at first because they were not familiar with such situation. After careful studies and rounds of consultation and negotiation, the Chinese company overcame difficulties and reached agreement with the Sri Lankan side to set up two joint ventures, and had acquired corresponding stakes.
I want to stress that the sovereignty over and ownership of the Hambantota port belong to Sri Lanka throughout the process. When it is done, if it so needs, Sri Lanka can repurchase part of or all stakes from the Chinese company until it takes it all back.
In addition, Chinese investment is mainly in the infrastructure sector. It may take a long time to yield returns, but they are valid assets whose value will grow in time. So in the long run, it is beneficial to host countries. Just like when young people buy a house with mortgages, they may take on some debt, but they have a place to live and they have their own assets.
We Chinese often say that if you want to get rich, build roads first. Africa has for many years received certain assistance from Western countries. But why couldn't it achieve faster development? One important reason is the underdevelopment of infrastructure. I have been to Africa and I know that many African countries, although in the same continent, are not connected by direct flights, railways or even roads. You have to fly to Paris or Zurich in order to get to another African country. How can the economy grow with such underdeveloped infrastructure. By investing in infrastructure, China is helping address the bottleneck that's been holding back Africa's development.
So Africa has a great need for infrastructure, including roads, railways, power plants, airports and sea ports. Chinese investment in these areas will help boost the local economy in time. A road is not just a means of transportation, but an economic belt or corridor that will catalyze the development of the whole region. According to Forbes, Chinese investment in Africa's infrastructure has generated US$50 billion in revenue for host countries every year. The Mombasa-Nairobi railway China helped build has created nearly 50,000 jobs for Kenya and driven its GDP up by 1.5%. CPEC, the China-Pakistan Economic Corridor, contributed 2.5 percentage points to Pakistan's GDP in 2016, which grew by 4.7%. In Sri Lanka, the Puttalam coal fired plant built by China is now providing over 40% of the country's electricity, benefiting 20 million plus people. About one third of additional electricity added to grid in Africa is attributable to China-invested projects.
In the past five years since the BRI was proposed, four railways undertaken by China in Africa were completed, i.e. the Mombasa-Nairobi railway, the Addis Ababa-Djibouti railway, the Abuja-Kaduna railway in Nigeria and the Benguela railway in Angola. The fact that China has delivered all these much needed infrastructure in a short period of time shows the BRI is making a big difference.
When making investment decisions, Chinese companies make sure that they are economically viable, with rigorous feasibility study and evaluation and by factoring in credit rating. We do things according to our ability. Likewise, we advise countries to act within their means and not to overstretch themselves when they consider projects that are not in line with local conditions.
Some media reports say China has created "traps" for certain countries. We find it unacceptable because we have made contributions to those countries. What does China bring to those countries? Is it a pie or a pitfall? Let facts and results speak for themselves. Better be patient for a while and do not jump to conclusions.
The media likes the word "trap", the "Thucydides trap", the "Kindleberger trap" and the "middle income trap". In our view, it represents a rather pessimistic perspective. We Chinese always believe that there are more opportunities than challenges, and more solutions than problems. Even in crisis, there lies opportunities. Being optimistic is important, which is also true when it comes to the debt problem. For those countries that are grappling with debts, once they pull it through, their economy may face a bright outlook. China was also financially stripped at some point in the past. But we dealt with it and made progress in our development. It is not realistic to expect a happy life to fall into your lap without working hard for it and taking risks, including taking on some debt in this case.
Jamil Anderlini: You were the Ambassador to India. So I do want to ask about India. They are obviously a bit worried about CPEC because they claim some of the territory that it goes through. So I'm wondering, is it a problem that India is not so far involved in this. And what might be the next step to try and deal with that?
Le Yucheng: Indeed, I served as the Chinese Ambassador to India. I know that although China and India may not see eye to eye on every issue, the two countries face similar development agenda. This year, President Xi and Prime Minister Modi met three times. One important consensus they reached is that China and India need to be cooperation partners that support each other in realizing their respective dreams. China-India relationship is now in a new stage and showing a new momentum.
Kashmir is an issue between India and Pakistan that is left from history. We believe the two parties should resolve the issue properly through dialogue and consultation. We don't side with either party. China borders Pakistan-controlled Kashmir, which is the only passageway linking the two countries. China is involved in some livelihood and economic development projects there. Those projects are not directed at any third party, and China has no intention of intervening into their dispute.
India may have its own views on the BRI. But China and India are cooperating closely on practical projects. TBEA, a Chinese company, has set up an industrial park in Gujarat, which is welcomed by the local community. China is also helping India increase the speed of its existing railways and build new railway stations. The two countries are also working on Bangladesh-China-India-Myanmar Economic Corridor. In addition, India is a founding member of the AIIB. About 20% of the projects funded by AIIB are in India. So India has gained tangible benefits from the BRI.
Jamil Anderlini: Thinking about Pakistan. It's interesting because I was there for about five days. The security situation seems much better than it was just a few years ago. I wonder it's still not very safe. So how does China make sure that these projects are safe? For example, in Pakistan? Maybe Afghanistan? Could you ever see a situation where we put Chinese troops or Chinese security to protect the BRI and Chinese workers and citizens?
Le Yucheng: The BRI involves a lot of countries. In some places, the situation is not secure yet. Primarily, we look to the government of host countries to provide for the security of BRI projects. The BRI cooperation agreements we have signed with various countries include provisions that the host countries will take up the security responsibility. For instance, Pakistan has set up a special force for the security of CPEC.
In our view, the lack of development is the biggest security risk. Progress made in the BRI will contribute to greater regional security. We have no intention of using the security of the BRI to set up overseas military bases, as we pursue an independent foreign policy of peace and a defense policy that is defensive in nature. That said, as a major country, China shoulders special responsibility for world peace and security. And China has taken part in the UN-led peacekeeping operations and efforts against terrorism and piracy. As Chinese servicemen and women help maintain peace in other parts of the world, far away from home for months even years, they need logistic support including supplies. The Djibouti base is set up for that purpose.
It must be pointed out that China's military presence overseas is much smaller and much less than other major countries. We never seek military intervention in other countries, least of all do we infringe upon other countries' territorial sovereignty. To protect the interests and safety of Chinese nationals overseas, the Foreign Ministry has put in place a consular protection mechanism, which however, has nothing to do with overseas military bases. It is one of the many means for the government to protect Chinese nationals.