BEIJING: After lending $1.3 trillion to developing countries, mainly for big-ticket infrastructure projects, China has shifted its focus to bailing out many of those same countries from piles of debt. The initial loans were mostly part of the Belt and Road Initiative, which President Xi Jinping started in 2013 to build stronger transportation, communications and political links in more than 150 countries.
Rescue loans climbed to 58% of China’s lending to low- and middle-income countries in 2021 from 5% in 2013, according to a new report from AidData, a research institute at William and Mary, a university in Virginia, that compiles comprehensive information about Chinese development financing.
AidData added, “estimates that 80% of China’s overseas lending portfolio in the developing world is currently supporting countries in financial distress”.
“Beijing is navigating an unfamiliar and uncomfortable role – as the world’s largest official debt collector,” the institute wrote.
With data compiled on Chinese financing of almost 21,000 projects across 165 countries, AidData said Beijing had now committed aid and credit of “around $80 billion a year” to low and middle-income nations. The US, in contrast, has provided $60 billion to such nations a year.
While the BRI bought geopolitical clout for Beijing and helped finance economically useful projects, Chinese loans were also used to build expensive projects that have not spurred economic growth and have loaded countries with debt they are now unable to repay. AidData calculated that China had lent $1.3 trillion since 2000, almost all to BRI countries.
China provided the money almost entirely as loans, not grants, and the loans tended to be at adjustable interest rates. As global interest rates have soared for the past two years, poor countries have found themselves owing far higher payments to Beijing than they expected. Unpaid debts to China are part of billions owed by developing countries to other nations, to the IMF and to private lenders.
