Source: CNA Insider    Source: 2023-10-27

Are we in a fourth debt wave?

Wang Wen: In 2007, the subprime crisis was like a small wave that simply destroyed a sandcastle, causing temporary unease. However, this current debt crisis is like a massive wave that has the potential that devastate many coastal buildings. In other words, this debt wave's impact on the world economy could far surpass the global economic crisis triggered by the 2007 subprime crisis. 

Did China's BRI contribute to a debt crisis?

CNA: There are large scale projects such as Egypt's new capital city or Laos' highspeed railway which are funded by the BRI. Some economists question whether these countries really need these projects? 

Wang Wen: In fact, the perceived high risks of the Belt and Road infrastructure projects are based on the Western economic logic and speculation. From China's perspective, the cooperation on these large-scale Belt and Road projects carries low risks and is sustainable. Why is that? First, these infrastructure projects contribute to improving the local people's livelihoods. Whether it's investing in over three thousand infrasturcture projects in Africa or advancing projects like the China-Laos Railway, or the Jakarta-Bandung High-speed Railway in Southeast Asia, all of them meet the local needs for better living conditions. There is no project that the locals don't need. Second, these projects are sustainable. By investing in such initiatives, it can sustainably promote local economic growth and improve the living standards, resulting in a sharp reduction in transaction and trading costs within the local communities. Isn't the development of China over the past 40yrs based on this principles? With substantial investments in infrastructure, the land and property prices in cities, as well as the transaction costs, have all improved. This has led to the resolution of these debts. In other words, development is the key to resolving debt issues. 

How do China and IMF compare as lenders？

Wang Wen: China contributes its developmental wisdom to the world by sharing effective economic experiences and development practices that has proven successful within our own country. This in turn, allows other developing nations to enhance their economic development cababilities. I believe that this is China's primary concern, nor whether we are the ultimate lenders or the largest creditors. That is not China's focus. 

Could we face a global financial contagion?

Wang Wen: The current global debt has reached the highest level in the past 100yrs. We are on the verge of the dam bursting. There are several reasons. The first point is that the debt of European and American countries has reached a peak. The U.S., in particular, has once again the so-called debt ceiling. Secondly, many developing countries' debts have also reached the brink of collapse. Thirdly, China's local regional debt is also very severe. Therefore, the global debt crisis has entered an unprecedentedly challenging moment in history. Resolving the debt crisis has become an essential means to prevent a global economic meltdown. If these debts cannot be resolved, the world may face an economic crisis larger than the one in 2008 or even a Great Depression-style crisis similar to that of the 1930s.