Start Asia China’s New Silk Road

China’s New Silk Road


The so-called „New Silk Road“ is a prestigious project of the Chinese government. China is financing the construction of ports, roads and similar infrastructure, especially in Asia and Africa. In Montenegro, for example, a new motorway is being built that will run from the sea to neighboring Serbia. But this example also shows the disadvantages of the big Chinese investment offensive. For one thing, the benefits of the new highway is controversial. For example, many experts point out that the development of airports would be more important for promoting tourism in the country. In addition, the local economy hardly benefits from the project: Of the previously approved 688 million euros, 400 million euros flowed directly to the Chinese construction group CRBC.

Sri Lanka has already had to cede a port to China

In addition, the work is carried out by Chinese workers, who have been freed from the actual taxes. The money for the construction of the highway in turn comes from a Chinese state bank. Overall, small Montenegro has been granted loans totaling almost one billion euros. For the country a huge sum – it corresponds to about a quarter of the gross domestic product. If the economy is not inspired by the construction of the highway as hoped, the state could even face bankruptcy. Other countries have been unable to repay the loans granted under the new Silk Road. For example, Sri Lanka had to hand over the newly built Hambantota port directly to the Chinese concern China Merchants for 99 years. Tajikistan even withdrew part of its own territory from China to pay outstanding debts.

It threatens a dangerous debt spiral

In Montenegro, after all, the loans were not backed up with such collateral – at least according to the current state of knowledge. The construction is to be financed mainly by toll revenues, which flow directly to the lenders. However, if these are lower than expected, the state treasury must step in. In the long run, this could lead to a debt spiral and ever greater dependence on China. But it is also true that no one has forced the government in Montenegro to enter into this risky bet. And: It is quite possible that the plan could work and such important infrastructure could be financed externally. The risk, however, is huge.