Switzerland has always had a lot of control over finance in the modern world. Now they have a new understanding with China through a memorandum to cooperate with China's Belt and Road Initiative. China makes a lot of deals that countries can't refuse, making them pay back billions in the end. Switzerland knows these projects are all part of a long-term plan for Chinese business to gain influence over the globe's markets.
China has Switzerland on board for their BRI in the form of a memorandum to cooperate. This was made apparent on CNBC, reporting that Swiss President Ueli Maurer met with Chinese President Xi Jinping on Monday, signing the memorandum of understanding on trade, investment and finance for projects in third countries along the routes of Xi's signature foreign investment program – the Belt and Road Initiative (BRI). Because Switzerland is internationally renowned for being one of the world's premiere finance hubs, this could make the BRI a bit more credible for the critics outside of China.
Zhu Ning, professor of finance at Tsinghua University in Beijing, had this to say: "I think it is helpful that China can engage more European countries for the BRI. Switzerland would provide very important help to BRI given (the) Swiss's advantage in global banking and financial services."
Before The BRI Is Bust
This agreement between Switzerland and China comes during a time when China is being criticized for their Belt and Road Initiative, which some see as a vehicle for getting poorer countries into debt so deep, they're trapped paying China back for investments for extremely long times – and for huge amounts.
Zhu Ning: "The accumulating debt involved in the BRI has prompted China to think more carefully about the sustainability of the BRI projects and how to combine the power of the state and the market to make it work, for Chinese and global participants. This becomes an even more important and pressing issue given that the RMB (the renminbi, China's currency) internationalzation process is not going as fast as a few years ago and it will pose some challenges to China's currently mighty foreign reserve."
The BRI is viewed by those outside China as Beijing's effort to expand China's global influence. The initiative creates infrastructure for trade with the construction of rail, sea and other transportation routes from central Asia to Africa. If countries can't pay back their loans to the Chinese financiers who bankrolled the projects, China ends up in control of the assets in other countries. U.S. Secretary of State, Michael Pompeo, calls some of these practices "predatory".
The Swiss/Chinese Agreement
The agreement between China and Switzerland is, simply put, one between Switzerland's federal departments of finance and economic affairs, education and research and China's National Development and Reform Commission. The main goal is to make the BRI a more competent platform. According to a release from the Swiss embassy, "Cooperation will be based on five key principles: private capital for private projects, sustainable handling of debts, consideration of social impacts, environmental protection criteria and transparency."
It remains to be seen if this new agreement with Switzerland will see China's BRI lose some of the negative stigmas attached to it.