China needs to fundamentally reform its delivery of development finance aid in the Pacific region to ensure it does not create a “debt trap” for vulnerable island nations through its Belt and Road Initiative, a report has warned.
The report published on Monday by the Lowy Institute warns if the current $6bn lending splurge from Beijing into the region continues in a “business as usual” manner then it poses a significant risk of future debt sustainability problems.
However, accusations from critics that Beijing is deliberately financing “white elephant” infrastructure via loans with the intention to expose small nations to default are alarmist and wide of the mark, it says.
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