Emerging economies must undertake "good project analysis" before taking on debt to fund infrastructure upgrades, according to the Asian Infrastructure Investment Bank (AIIB).
"The capacity to take on debt to invest allows countries to grow faster, but only if they invest well," Joachim von Amsberg, vice president of policy and strategy at the China-led investment bank told CNBC on Tuesday at the World Economic Forum. A project's ability to generate strong economic returns should be the biggest determining factor for governments, he added.
His comments come as criticism mounts on China's globe-spanning infrastructure program known as the Belt and Road Initiative.
One of the biggest complaints about the project is its reliance on Chinese workers and unsustainable loans which many participating nations may not be able to afford in the long term.
If emerging economies can't generate enough cash to pay the interest on China's loans, Beijing may seek economic or political concessions as compensation as was the case with Sri Lanka. The phenomenon has been dubbed debt-trap diplomacy, which Chinese President Xi Jinping's administration has denied engaging in.
Despite those financing risks, many African leaders have said capital from China remains the best means to develop their respective economies.