Date: August 8, 2023

Interviewer: Chen Yan, Reporter at BBC News Chinese at BBC

Interviewee: Kung Chan, Founder of ANBOUND

For years, ANBOUND's founder Kung Chan has provided his unique analyses to BBC Chinese and is an important figure in their sourcing. During the Beijing Olympics, Mainland China temporarily eased restrictions on BBC's operations within the country. At that time, BBC was surprised to discover that China had fact-based analytical organizations like ANBOUND, whose perspective, especially that of its founder, proved to be valuable insights for their reporting on the real China. Recently, in light of the debt relief pressure confronting China, Chen Yan, the bilingual reporter at BBC NEWS Chinese conducted an interview with Kung Chan.

With a well-balanced approach, Kung Chan explored the global context of China's debt issues, and the factors contributing to debt relief pressure, as well as provided a reasoned perspective on the current circumstances.

Chen Yan: In recent years, why has China faced increasing pressure to provide debt relief to less developed countries?

Kung Chan: There are primarily two reasons for this. First, there is the international economic environment. The economic downturn has become quite evident, hence there is the heightened debt pressure, especially for impoverished nations. Second, China itself contributed to this. China's assistance to less developed countries has traditionally been divided into two categories, namely commercial aid and governmental aid. Commercial aid, in particular, has been substantial in this, which places significant pressure on the receiving countries. Additionally, the expiration of the G20's Debt Service Suspension Initiative and impending interest rate hikes, along with ongoing negotiations for an enhanced version of the Common Framework for Debt Treatment, all these factors are making it increasingly challenging for low-income nations to meet their debt obligations. Due to these reasons, the calls for debt relief by less developed countries have become more pronounced. I personally believe that it is understandable for these nations to seek debt relief. What is less comprehensible is the biased stance taken by some in the West. In my view, a more objective standpoint should be adopted regarding this issue, as the problems that China, as an assisting nation, faces today, are issues that Western countries will also encounter. Excessive politicization should be avoided.

Chen Yan: How does China's debt relief differ from that of Europe and the United States, such as in terms of the nature of the debt?

Kung Chan: This is an extremely complex issue that cannot be easily answered. According to incomplete statistics, there are over 70 low-income countries worldwide burdened with a total debt of USD 326 billion. Among them, approximately 15% of low-income countries have already fallen into debt distress, but the reasons behind this are highly intricate. In August 2022, China waived 23 interest-free loans for 17 African countries. These loans were funded from China's budget for foreign aid, making the relief process relatively straightforward. However, other debt relationships are more intricate. It is said that in China's foreign aid, three-quarters of it includes clauses that do not go through the Paris Club process. China is not a permanent member of the Paris Club, but it is a member of the G20, so the common framework for debt issues within the G20 significantly influences China. Otherwise, debt relief by China could be determined only in terms of China's official stance.

Chen Yan: China's economy is slowing down. How can it balance the pressure of debt relief with domestic fiscal constraints?

Kung Chan: In this regard, there are enormous difficulties far more than what the external world understands. Currently, there is a clear and strong dissatisfaction within China regarding debt relief. Many people oppose providing debt relief, because these past debt relationships and their formation were often achieved through major diplomatic efforts by those countries. At that time, the political attitudes within those countries were also unanimous. Such opinions and stances constitute the prevailing attitude within China, and the Chinese government cannot ignore this formidable internal pressure. Furthermore, in the context of a global economic slowdown, the Chinese government is also facing fiscal pressure, with many local governments burdened by heavy debt. Therefore, I personally anticipate that China will not entirely adhere to the conditions set by Western countries and participate in the G20's common framework. The Western world should also take an open attitude, as politicizing debt resolution makes it hard to genuinely address the debt issues of low-income countries.

Chen Yan: Against such a backdrop, what is the future of the Belt and Road initiative?

Kung Chan: This is a question I have repeatedly discussed in the past. I believe that the BRI must be adjusted and revised. In the future, people will see this happening more frequently and more clearly. Regarding these, in my interview with Nikkei Asia in 2022, I mentioned that "although the overall development environment around the BRI has worsened, one cannot expect the Chinese government to come out and announce it won't stay the course. It is inevitable that the BRI will be adjusted 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 -- again depending on the top leader's will".

Access to this interview on the site https://www.bbc.com/zhongwen/simp/business-66459321