Caixin
Nov 20, 2018 06:55 PM
WORLD

China-Japan Projects Shouldn’t Burden Developing Nations With ‘Unmanageable’ Debt, Japanese Ex-Foreign Minister Says

Former Japanese Foreign Minister Yoriko Kawaguchi speaks during a panel discussion at the Bloomberg New Economy Forum in Singapore on Nov. 6. Photo: VCG
Former Japanese Foreign Minister Yoriko Kawaguchi speaks during a panel discussion at the Bloomberg New Economy Forum in Singapore on Nov. 6. Photo: VCG

China and Japan should avoid burdening developing countries with “unmanageable” debt, a former Japanese foreign minister told Caixin in a recent interview.

Yoriko Kawaguchi’s words come as China has faced accusations of creating “debt traps” abroad, while improving relations with Japan have led to bilateral cooperation plans in third-party markets.

During Japanese Prime Minister Shinzo Abe’s visit to Beijing in late October, Japan ended its official development assistance to China — which had lasted for nearly four decades — making way for the two to cooperate in third-party markets. Meanwhile, multiple entities from each side signed over $18 billion worth of agreements targeting such cooperation, some of which involve infrastructure projects.

China and Japan should reach a consensus on “evaluation methodology” — how to evaluate whether a particular project can be funded — said Kawaguchi, currently a visiting professor at the Japan-based Musashino Institute for Global Affairs.

For instance, projects should be considered viable only if the recipient country has the ability to pay back related loans, Kawaguchi said. “We don’t want the recipient countries to be burdened with unmanageable debt,” she said.

Currently, developing countries have many debt problems. China’s cooperation with developed countries in third-party markets, along with its ambitious Belt and Road global infrastructure initiative, have added to concerns that recipient countries could find themselves further mired in debt.

Beijing has seen a backlash against its lending in countries that include Malaysia, the Maldives, and Pakistan this year due to the hefty burdens with which these countries could be saddled.

‘Give a fishing rod rather than fish’

China and Japan can complement each other during cooperation in third-party markets, as they have different methods and advantages, Kawaguchi said.

With a long track record of assisting developing countries, Japan’s methodology is to “give a fishing rod rather than fish,” while China has some networks that Japan doesn’t have, she added.

Another often-discussed topic about infrastructure projects in developing countries is environmental protection.

Japanese companies need to talk with their Chinese partners on this issue, suggested Kawaguchi, who is also a former environment minister. If a Japanese firm did something that would damage the environment of a recipient country and damage Japan’s reputation, it would face strong criticism from domestic public opinion, she said.

China and Japan, Asia’s two largest economies, have seen their relationship improving this year, which marked the 40th anniversary of the signing of their peace and friendship treaty — despite the historical enmity between the two neighbors that still lingers among some.

Abe’s trip to Beijing, and the May visit of Chinese Premier Li Keqiang to Tokyo, marked the first high-level exchanges between the two countries in nearly seven years.

Learning about each other and what should be changed is a long process, but it’s a worthwhile one, Kawaguchi said.

Timmy Shen contributed to this report.

Contact reporter Lin Jinbing (jinbinglin@caixin.com)

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