The head of the International Monetary Fund has warned China against damaging the environment through unsustainable overseas investments as part of its “belt and road” infrastructure initiative.

Christine Lagarde, the IMF’s managing director, used a speech in Beijing on Friday to urge the Chinese government to focus the initiative, which involves spending billions on overseas infrastructure projects to connect China with the world, on sustainable development.

Lagarde also said investment should not build up vast levels of debt that could prove problematic in future. “I have said before that, to be fully successful, the belt and road should only go where it is needed. I would add today that it should only go where it is sustainable, in all aspects,” she said.

She was speaking at a gathering of world leaders in the Chinese capital to pitch for investment via the belt androad project.

Philip Hammond, the British chancellor, was at the event to promote Britain, although it came during a diplomatic row over UK contracts for the Chinese telecoms company Huawei amid national security concerns.

China had said on Thursday it would take greater account of environmental issues in its investment decisions.

Global concern is rising over the impact of climate change, illustrated by the Extinction Rebellion protests in Britain and school strikes across Europe sparked by the Swedish climate activist Greta Thunberg.

Lagarde said: “The launch of the green investment principle at this conference is a further important step forward for the belt and road initiative – and a step forward for green, low-carbon and climate-resilient investment.

“Debt sustainability and green sustainability will strengthen belt and road sustainability.”

Xi Jinping, China’s president, sought to allay concerns over the initiative, which aims to expand Chinese influence around the world but has generated concerns over its sustainability.

Developing countries, where much of the spending has been directed, have broadly welcomed the initiative to expand trade between Asia, Africa and Europe by building roads, ports and other facilities and infrastructure.

However, there are fears some countries could fall into debt traps because of the high costs of the projects. China’s debt levels have also surged in recent years, prompting fears over its financial stability.

There are also concerns about corruption, and the environmental impact of projects which link China to natural resource-rich economies.

Xi said: “Everything should be done in a transparent way and we should have zero tolerance for corruption.”

Western countries, led by the US under Donald Trump in particular, worry Beijing is trying to build a network that could threaten their traditional economic dominance.

Xi is trying to reboot the initiative after the number of new projects fell last year.

China had increased the scrutiny of its state-owned banks involved in funding the plans, amid fears over rising debts and after some target countries complained the projects would not do enough for their economies and gave too much power to Beijing.

Malaysia and Thailand are among countries that have cancelled or scaled back projects, while Ethiopia has renegotiated its debt repayments.

Xi said China was applying debt sustainability criteria recommended by the IMF.