China's ambitious global infrastructure development project Belt and Road Initiative (BRI) which began with much fanfare in 2013 has been courting much controversy due to its dismal performance resulting from mismanagement, debt crises and corruption in the debtor countries. Chinese President Xi Jinping once proclaimed that the Belt and Road Initiative (BRI) was the "project of the century", but it is on the verge of crisis with just a couple of months until the 20th Chinese Communist Party Congress in Beijing, according to several media reports.<br />''<br />''The multi-billion-dollar BRI was launched by Chinese President Xi Jinping when he came to power in 2013. It aims to link southeast Asia, central Asia, the Gulf region, Africa and Europe with a network of land and sea routes by pumping in billions of dollars of loans for infrastructure projects in countries from Asia to Africa and Europe, enhancing its global influence. However, BRI projects have drawn global criticism for its design faults like not offering enough transparency around its loans, insufficient risk management on projects, lack of environmental and social impact studies leading to public protests, corruption and chronic delays. There have been questions and heated debates on the value and sustainability of high-profile infrastructure projects and collateral clauses which may give China the right to seize strategic assets or to the foreign exchange of the debtor country in the event of a default. This has fueled the accusations of China's "debt trap diplomacy".<br />''<br />''However, Chinese Foreign Ministry on Thursday said "Chinese debt trap" is a lie made up by the US and some other Western countries to deflect responsibility and blame. He said, China has signed BRI cooperation documents with 149 countries and 32 international organizations. We have adopted more than 3,000 cooperation projects which involve nearly US$1 trillion of investment, he said adding that China has been implementing the G20 Debt Service Suspension Initiative and the biggest contributor to the effort.<br />''<br />''A Japan based newspaper questioned whether the BRI is a net economic benefit — or even, in many cases, a liability for the participant countries. Part of the problem is that, while BRI investment is portrayed as aid, it is most often not, it said. The initiative is intended to make money for Chinese banks and infrastructure companies, funded mainly by loans and energy supply agreements that in many cases have outrun their recipients' ability to pay as was seen in Pakistan, SriLanka, Zambia. According to data collected by Rhodium Group, a New York-based economic research company, the total value of loans from Chinese institutions that had to be renegotiated in 2020 and 2021 rose by $36 billion from the previous two years, surging to $52 billion. Another report by AidData suggested many BRI countries together might have $385 billion in "hidden debts" or undisclosed liabilities that governments might be obliged to pay. The renegotiations which mostly involved loan write-offs, deferred payment schedules and reductions in interest rates were necessitated by deteriorating financial conditions in debtor countries plus project-specific problems. Recently, Zambia cancelled US$1.6 billion in agreed upon but not-disbursed Chinese loans, mostly from China Exim Bank and the Industrial Commercial Bank of China, to stabilise its macroeconomic position. China has since agreed to debt restructuring that paves the way for the southern African nation to access a US$1.4 billion bailout from the IMF, according to media reports.<br />''<br />''Experts said, most challenging thing for China and for BRI debtors that have already defaulted such as Sri Lanka and Zambia is to quickly resolve crises alongside fellow creditors such as the World Bank, other multilateral lenders and international bondholders.<br />''<br />'' According to a Hong Kong based newspaper, there are "some indications" that the IMF is now putting pressure on borrowers to disclose more information on their belt and road loan contracts, especially on 'terms and conditions' that could make coordinated debt restructuring with other creditors more difficult. IMF has focused on cash collateral clauses in BRI loan contracts that give China a first priority claim on foreign exchange in borrower countries," according to the report. Debt transparency is a priority for the IMF, its spokesperson said. How much China will align itself with IMF led debt sustainability standards is unclear but the spectre of a debt crisis among developing nations is very clear unless sufficient risk management studies are done before financing the projects.<br />''<br />''Responding to concerns of a debt crisis in developing countries, Chinese Foreign Ministry on Thursday said the developing countries' medium- to long-term debt payment mainly flowed to Western commercial creditors and multilateral institutions. According to World Bank estimates, low-income and lower-middle-income countries have to make US$940 billion worth of principal and interest repayments in the next seven years, including US$356.6 billion to Western commercial creditors and US$273 billion to multilateral institutions, 67% of the total payments due. Only 14% of their total payments, or US$130.8 billion, will go to the Chinese government and commercial institutions.<br />''<br />''At the Boao Forum for Asia in April, former central bank governor Zhou Xiaochuan acknowledged that some Chinese lending might not have always been "carefully designed" and poor communication has created problems. Meanwhile, in China, the state banks that are lending to the BRI are increasingly troubled by bad debts. Against the backdrop of tighter debt monitoring by global financial institutions, China has also become more cautious about its belt and road financing, with its big policy banks growing increasingly wary about borrowers' ability to repay loans. Experts say, that the BRI will be adjusted and it may shrink from a strategic vision of economic cooperation across land and sea to a regional multilateral cooperation initiative, or completely abandoned on a gradual basis.<br />'' <br />''<span style="color: #222222;">A report from Fudan University also highlights the changing nature of the BRI as it adapts to a combination of a strained global economy, China's shifting position in the world, and many countries who inked deals and took out loans through the initiative now grappling with a growing debt crisis. BRI spending has been declining for several years as Beijing becomes more risk averse. The report shows a total of $28.4 billion in Chinese investment across 147 BRI countries over the first half of 2022, down from $29.6 billion over the same period last year.</span><br />