U.S. Treasury Secretary Bessent accuses China of turning its Belt and Road Initiative into a debt collection operation

Chinese President Xi Jinping promoted the “One Belt, One Road” initiative in 2013. (AP file photo)

[Financial Channel/Comprehensive Report] China's "One Belt, One Road" initiative has been frequently questioned by the outside world about its debt problem in recent years, and now it has been named again. U.S. Treasury Secretary Scott Bessent pointed out at a congressional hearing that China's Belt and Road Initiative has transformed from initial infrastructure financing to a "debt collection operation." He also criticized China for using opaque lending terms and hidden regulations to hinder the debt restructuring of developing countries.

"IANS", "FM Bharat" and other media reported that Bessant made the above remarks during a hearing on the international financial system held by the US House of Representatives Financial Services Committee. He pointed out that China has provided loans to many countries through the Belt and Road Initiative, but some borrowing countries are now facing debt repayment difficulties, so the nature of the Belt and Road Initiative has changed.

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"In my opinion, this Belt and Road Initiative, as it's known, has turned from a lending operation into a debt collection operation because they have bankrupted many of the borrowing countries or are driving many of the borrowing countries into bankruptcy," Bessant said.

He further criticized that China's lending system contains many interest suspension agreements and hidden clauses, resulting in a lack of transparency in the debt restructuring process. He stressed that greater transparency is key to successful debt restructuring for countries trying to renegotiate debt they cannot sustainably repay.

Bessant revealed that the United States also discussed China's lending methods at the recent G20 meeting in Asheville, North Carolina. He said that after relevant G20 discussions, the first debt restructuring case is expected to occur, but he has not yet disclosed which country is involved, nor has he announced a timetable.

The hearing also focused on China's role in international financial institutions. House Financial Services Committee Chairman French Hill said the World Bank's decision to phase out loans to China by 2031 is "an important step in the right direction."

Hill pointed out that China itself has huge financial resources and is also one of the world's major creditor countries, and it uses state-led investment to promote economic and geopolitical interests around the world. Therefore, he questioned why U.S. taxpayers still support World Bank loans to China, the world's second largest economy.

In addition to the World Bank, the IMF's handling of China's economic problems has also attracted attention from members of Congress. Hill questioned whether the IMF was adequately addressing China's economic imbalances, while Bessant said the IMF was currently conducting in-depth consultations with Beijing to discuss China's economic imbalances and their possible impact on global financial stability.

Bessant also talked about the confrontation at the recent G20 meeting. He said that the United States drafted a communiqué criticizing "non-market economies" during the meeting, but China refused to sign it.

"So it's 19 to 1. You can imagine how difficult it is to get these countries from all over the world to reach a consensus, and China is the only country that refuses," Bessant said.

In addition, Bessant also emphasized that the dominance of the U.S. dollar in the global financial system remains strong. Despite attempts by China and Russia to reduce their dollar-denominated foreign exchange reserves, the U.S. dollar's share of global transactions has increased this year.

The Belt and Road Initiative was proposed by Chinese President Xi Jinping in 2013. It mainly uses financing to promote infrastructure construction such as ports, railways, highways and energy in Asia, Africa, Europe and Latin America. However, in recent years, some participating countries have begun to seek to renegotiate related debts due to debt repayment pressure, and China's external lending model has continued to attract international attention.

Regarding the "debt trap" doubts from the outside world, the Chinese government continues to deny the relevant accusations and emphasizes that the Belt and Road Initiative is a platform to promote infrastructure construction and international economic cooperation.

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