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Chinese loan interest rate not high, over 50% of loans only on 2% interest rates: CCCSL spokesperson

April, 27, 2015

Referring to an allegation by a high-ranking official of Sri Lanka’s Finance Ministry that the interest rates on Chinese loans are high, the spokesperson of the Chinese Chamber of Commerce in Sri Lanka (CCCSL) told Xinhua that the interest rates of Chinese loans are not high.

During the past 10 years, at the request of Sri Lankan government, China has provided loans amounting to several billions of US dollars in supporting the country’s economic and social development, among which more than half are at the interest rates of only 2%.

China provides preferential loans at low interest rates to developing countries world-wide with the purpose of helping them upgrade infrastructure construction and improve the people's wellbeing. By granting discount loans, the Chinese government extends its goodwill to developing countries. The interest rates of Chinese commercial loans are also much lower than most of those in the international market or the Sri Lankan commercial banks during the same period, the spokesperson added.

As for the commercial loans, the spokesperson further pointed out that the international financing costs rose in 2007 and the Sri Lankan government issued treasury bonds at the interest rates ranging from 12% to 14% during that period when the island was still in internal conflict. At that time, the relevant Chinese banks provided Sri Lanka with a large amount of preferential loans as well as some commercial loans with 6% interest rates which were quite favorable and reasonable at the time.

The spokesperson stressed that it is the Sri Lankan government which submitted applications for loans from Chinese banks and that no one had forced the Sri Lankan side to apply for loans. The Sri Lankan side always conducted a thorough survey prior to applying for loans from China. The negotiators from the Sri Lankan side were very professional and loyal to their country and its people while negotiating loan agreements with Chinese banks.

The spokesperson said that just as the financial experts have indicated, the interest rates of the loans from some international financial institutions are relatively lower, but however, they can provide only limited amounts of loans which cannot meet the urgent demands of developing countries for their economic development and infrastructure construction. Nevertheless there are certain prerequisites attached to such loans. It is quite difficult and time-consuming to complete the application procedure for these loans. In contrast, the Chinese banks have enough funds and could provide preferential and commercial loans through a comparatively quick examination and approval procedure without any prerequisites. Such timely help and assistance is welcomed by the developing countries including Sri Lanka.

The prompt and abundant Chinese loans at lower interest rates have made great positive contributions to the state reconstruction and development of Sri Lanka. For instance, the Norochcholai Coal Power Plant funded by Chinese loans now generates more than 50% of the whole country's power and which has completely solved the problem of power shortage for this island, lowered the cost of electricity to a great extent, which are benefiting every family and every economic and social sector. Secondly, over 1,000 kilometers of roads at different levels have been completed with the support of Chinese loans and this has made it easier and more convenient for the local people to travel and do business. Better roads powerfully support the social and economic development of Sri Lanka, pointed out the spokesperson.

Wrongful allegations by some high ranking officials on the interest rates of Chinese loans has damaged the image of Chinese banks in Sri Lanka and have demoralized their enthusiasm of offering preferential loans to the country. “We hope the Sri Lankan officials concerned would make their remarks while based on facts, take the people's well being as the utmost priority and make joint efforts with the Chinese side to maintain the good image of China-Sri Lanka cooperation,” added the spokesperson.