Chinese loans to countries in debt distress soared from less than 5% of its overseas lending portfolio in 2010 to 60% last year, according to new research.
Reuters reports that the study by researchers from the World Bank, Harvard Kennedy School, AidData and the Kiel Institute for the World Economy shows that Beijing has spent $240 billion (R4.4 trillion) bailing out 22 developing countries between 2008 and 2021.
The researchers found that the amount had soared in recent years, as more nations struggled to repay the loans for China’s so-called ‘belt and road’ infrastructure.
Almost 80% of the lending was made between 2016 and 2021, mainly to middle-income countries including Argentina, Mongolia and Pakistan.
Reuters reports that lending has tailed off since 2016 as many projects have failed to pay the expected financial dividends.
China is negotiating debt restructuring with Zambia, Ghana and Sri Lanka, and has called on the World Bank and International Monetary Fund to offer debt relief.
One of the study’s authors, former World Bank chief economist Carmen Reinhart, is quoted as saying: ‘Beijing is ultimately trying to rescue its own banks. That’s why it has gotten into the risky business of international bailout lending’.
The study is critical of some central banks potentially using the People’s Bank of China swap lines to artificially pump up their foreign exchange reserve figures.
Another co-author and director of AidData, a research laboratory at the College of William & Mary in the US, Bradley Parks, describes China’s rescue lending as ‘opaque and uncoordinated’.
Beijing has countered the criticism, saying its overseas investments operated on ‘the principle of transparency’.
A Chinese foreign ministry spokesperson, Mao Ning, said that China respected the will of relevant countries, would not attach any political conditions to loan agreements, and did not seek any political self-interest.
[Image: https://blogs.worldbank.org/eastasiapacific/what-can-african-countries-learn-china-about-transport-and-logistics]