Daily Management Review

China Expended $240 Billion To Bail Out Developing Countries On The 'Belt And Road' Project, Study Shows


China Expended $240 Billion To Bail Out Developing Countries On The 'Belt And Road' Project, Study Shows
According to a research published Tuesday, China expended $240 billion bailing out 22 developing countries between 2008 and 2021, with the amount increasing in recent years as more have struggled to repay loans spent building "Belt & Road" infrastructure.
According to a report by academics from the World Bank, Harvard Kennedy School, AidData, and the Kiel Institute for the World Economy, about 80% of rescue lending was made between 2016 and 2021, primarily to middle-income countries such as Argentina, Mongolia, and Pakistan.
China has financed hundreds of billions of dollars to poor countries to build infrastructure, but lending has slowed since 2016 as many projects have failed to produce the projected financial dividends.
"Beijing is ultimately trying to rescue its own banks. That's why it has gotten into the risky business of international bailout lending," said Carmen Reinhart, a former World Bank chief economist and one of the study's authors.
According to the analysis, Chinese loans to debt-ridden countries increased from less than 5% of its international lending portfolio in 2010 to 60% by 2022.
Argentina received the most money, $111.8 billion, followed by Pakistan, which received $48.5 billion, and Egypt, which received $15.6 billion. Nine countries received less than one billion dollars.
Swap lines from the People's Bank of China (PBOC) provided for $170 billion of the rescue finance, including in Suriname, Sri Lanka, and Egypt. Chinese state-owned banks provided $70 billion in bridge loans or balance-of-payments support. Rollovers of both types of loans totaled $140 billion.
The report criticized certain central banks for potentially exploiting PBOC swap lines to artificially boost their foreign exchange reserves.
According to Brad Parks, one of the report's authors and head of AidData, a research lab at William & Mary College in the United States, China's rescue financing is "opaque and unorganized."
Due to the risk they pose to Chinese banks' balance sheets, bailout loans are primarily concentrated in middle-income nations, which account for four-fifths of its lending, while low-income countries are provided grace periods and maturity extensions, according to the research.
China is negotiating debt restructurings with Zambia, Ghana, and Sri Lanka, and has been chastised for slowing down the process. In response, it has urged the World Bank and the International Monetary Fund to provide debt relief as well.