Loans from China “easy but not cheap”

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Reaction of public opinion on an intended loan of $US 300 million from China to invest for construction of Van Don - Mong Cai express way

Dr. Pham Sy Thanh, Director of China Research Program, Vietnam Institute for Economic and Policy Research (VEPR) stated that China had established many Development Funds to provide finances, especially for developing countries.

The loans from China up to now have been considered as cheap, but in fact that the loans from China are easy to obtain, but not cheap. Dr. Thanh explained that the reason why the loans from China are cheap is that the constraint on environment and civil right benefits in loan policy of China is not tight. This is different from tight constraints on environment and social welfare, etc of the World Bank (WB), Asian Development Bank (ADB) etc during the past time. However, this causes terrible consequences which are risks to environment, society and finance.

Analysis about the risks of Chinese loans, with an increase of investment capital, the research showed that the actual expenses of projects funded by Chinese loans are large. Besides, due to loose policies in loans, many developing countries that have high demands for capital, feel quite comfortable with this capital flow. And unawareness of all impacts of pollution from China's capital has strongly influenced the environment, society and development plans.

Dr. Thanh advised to consider carefully before borrowing capital from China because this capital resource has many challenges. We still have high quality capital resources from Japan as well as other financial institutions to solve investment matters.

Agreeing with this view, economic expert Luu Bich Ho said that, we must be very vigilant with the impacts of Chinese loans on the economy, the environment, and politics. Accordingly, we should prefer loans from WB, ADB than Chinese loans.

Talking about this matter, economic expert Pham Chi Lan stated that we must focus on economic challenge when discussing Chinese loans. This challenge is reflected in some aspects such as the Chinese loans are much bigger than the initial loans. The receiving of loans from China will block the local companies and derange Vietnam’s development plans, extract cheap resources of Vietnam and make Vietnam dependant on China.

An evidence is that we intended to borrow $US 300 million from China to invest for construction of expressway Van Don – Mong Cai (Quang Ninh), the expert Pham Chi Lan stated that we absolutely can mobilize domestic resources to carry out the project.

“We extremely appreciate the loans from ODA, FDI and outside loans and we are attaching exaggerated importance to external resources and ignoring the internal resources. When we have a demand for capital, we firstly think about the external resources and are ready to borrow foreign capitals with high interest rates. Thus, the country’s potentials are exploited by foreign countries while we must rely on foreign countries and do not create conditions for companies and citizens in the country” the expert Pham Chi Lan acknowledged

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According to this expert, in relation to China and other countries, the important issue is that “we must determine benefits to decide to play or not play”. With loans from China, we should consider carefully all aspects to prevent complexities in the future