China spent $240 billion to bail out Belt and Road countries: study

China spent $240 billion to bail out 22 developing countries between 2008 and 2021, but the amount has skyrocketed in recent years as more people struggled to repay loans needed to build the Belt and Road. infrastructure, a study published on Tuesday showed.

Almost 80% of loans were made between 2016 and 2021, mostly to middle-income countries including Argentina, Mongolia and Pakistan, according to the report by researchers at the World Bank, Harvard Kennedy School, AidData and the Kiel Institute for the World Economy.

China has borrowed hundreds of billions of dollars to build infrastructure in developing countries, but lending has contracted since 2016 as many projects failed to pay expected financial dividends.

“Beijing is ultimately trying to bail out its own banks. That’s why she got into the risky business of international bailout loans,” said Carmen Reinhart, former chief economist at the World Bank and one of the authors of the study.

According to the study, Chinese loans to countries in distress rose from less than 5% of the foreign loan portfolio in 2010 to 60% in 2022.

Argentina received the most with $111.8 billion, followed by Pakistan with $48.5 billion and Egypt with $15.6 billion. Nine countries received less than $1 billion.

The People’s Bank of China (PBOC) swap lines accounted for $170 billion of funding, including in Suriname, Sri Lanka and Egypt. Bridging loans or balance-of-payments support from state-owned Chinese banks and companies totaled US$70 billion. Rollovers of both types of loans totaled $140 billion.

The study criticized some central banks that may be using the PBOC swap lines to artificially boost their foreign exchange reserves.

China’s bailout loans are “opaque and uncoordinated,” said Brad Parks, one of the report’s authors and director of AidData, a research lab at the College of William & Mary in the United States.

China’s government hit back at the criticism, saying that its foreign investments were made on the “principle of openness and transparency.”

“China acts in accordance with market laws and international rules, respects the will of relevant countries, has never forced any party to borrow money, has never forced any country to pay, will not attach any political conditions to loan agreements and will not seek any political one Self-interest,” Foreign Ministry spokesman Mao Ning said at a news conference on Tuesday.

The bailout loans are mainly focused on middle-income countries, which account for four-fifths of lending, as they pose a risk to Chinese banks’ balance sheets, while low-income countries are offered grace periods and maturity extensions, the report said.

China is negotiating debt restructuring with countries like Zambia, Ghana and Sri Lanka and has been criticized for delaying the process. In response, she has called on the World Bank and International Monetary Fund to also offer debt relief.

Related Articles

Back to top button

Subscribe To Our Newsletter

Don't miss new updates on your email