The scale of China's transport lending to the Global South is so large that if directed responsibly to sustainable transport projects, it could be transformative. If misdirected however, it could ensnare developing countries into unsustainable levels of debt, as well as lock the rapidly growing cities of the Global South into motor vehicle domination that diminishes the safety of residents and threatens the sustainability of the planet.
This report reviews China’s overseas transport lending from the perspective of best practice in sustainable transport. It then provides eight recommendations for better aligning this lending with best practice.
eight recommendations
1. Help debtor countries grow out of their debt
The current Covid-19 related debt crisis is a chance for China to show its commitment to helping countries grow out of debt rather than hoping that austerity will ensure its banks get repaid.
2. Fully assess economic and financial impacts of transport projects
Chinese export credit agencies (ECAs) should more carefully assess the likely financial and economic impacts of their loans to ensure that the current problems with debt repayment do not recur.
3. Perform an alternatives analysis and fund the option with the best return on investment
Chinese megaprojects have crowded out investments that would have done more for less. A more careful appraisal of lower cost, higher impact alternatives should be required before a loan moves forward. These include:
- Upgrade roads and/or railways on existing alignments before building on new alignments
- Build more bus rapid transit (BRT) and less light- and heavy rail
- Build urban roads with amenities for public transit, cyclists, and pedestrians
4. Coordinate better with other international donors
China's export credit agencies (ECAs) should follow best practice international competitive bidding and procurement procedures, respect and participate in country-level debt caps, harmonize procedures for environmental and social due-diligence, and follow the same transparency guidelines as the multilateral development banks (MDBs) and other ECAs.
5. Improve labor conditions and labor relations
6. Increase in-house capacity to lead rather than follow project development
7. Assist borrowers with resettlement following best practice
8. Use project financing to promote Chinese best practices
China has some of the best BRTs, waterfronts, bikeways, metros, public spaces, and other transportation amenities in the world and can build them fast and well. China could do more to promote loans in these more sustainable areas. China also has high functioning municipalities and could do more to build the municipal capacity of its borrowers.