NADI, FIJI – Finance Minister Taro Aso said Thursday he told his Chinese counterpart, Liu Kun, that China should no longer depend on loans from the Asian Development Bank.
China must “graduate from” ADB loans, Aso told a news conference after holding talks with Liu on the sidelines of an annual ADB conference that opened in the Fiji resort city of Nadi the same day.
Aso said he finds it problematic that China, while taking loans from the ADB as a developing country, makes excessive loans to emerging economies, which causes some of them to face repayment difficulties.
“It’s the same as excessive lending by consumer credit companies,” he added, noting that some developing countries may not realize the interest commitments they are taking on along with the debt burden. China’s 99-year lease of the port in Hambantota, Sri Lanka, was one example, Aso said.
By criticizing Beijing’s stance, Aso apparently aims to pave the way for the ADB to reduce its loans to China and allocate more funds to emerging countries that need financing for infrastructure development.
Developing a method to enable low-income countries to continue repaying their loans has become an issue in relation to China’s “Belt and Road” regional development initiative.
On that matter, Aso and Liu discussed ways to develop guiding principles for high-quality infrastructure investment based on repayable loans.
“We had arguments but could gradually have calm discussions,” Aso told the news conference, suggesting that the two sides had been able to meet each other halfway on some areas.
Japan and China are expected to continue talks on the issue. The two finance ministers apparently remained apart on ways to assess the circumstances of borrower countries.
Such issues are also likely to be discussed at a Group of 20 meeting of finance ministers and central bank governors set to be held in Fukuoka in June.
At a meeting in Baden-Baden, Germany, in 2017, G20 financial officials adopted operational guidelines for sustainable financing.
Japan plans to ask its G20 counterparts, including China, to check independently on whether they are following these guidelines.
Meanwhile, Asian finance chiefs agreed Thursday to consider the yen and Chinese yuan for currency swap arrangements in addition to the U.S. dollar in an effort to deal with possible financial crises, while also rejecting protectionism amid U.S.-China trade tensions.
The addition of local currencies to swap agreements, known as the Chiang Mai Initiative, are “one enhancement option,” the finance ministers and central bank governors of Japan, China, South Korea and the Association of Southeast Asian Nations wrote in a joint statement following their meeting in Fiji.
The Chiang Mai Initiative is a U.S. dollar-denominated multilateral currency swap arrangement under which member countries facing short-term liquidity shortages can access a pool of dollars in exchange for their currencies. The initiative was launched in 2000 with the aim of preventing a repeat of the 1997 Asian currency crisis.
Members are now considering adding the Japanese and Chinese currencies to the $240 billion safety net in a bid to reduce its overreliance on the dollar.
The move is expected to help internationalize the yen and the yuan, while expanding the economic clout of Japan and China in the region. But it is unclear whether the United States would accept such a development.
The participants also shared their concerns about negative impacts on economies in the region from the ongoing trade war between the world’s two largest economies.
“We reaffirm our commitment to uphold the rules-based multilateral trading system and open regionalism, while resisting all forms of protectionism,” the joint statement said.