Daily Management Review

FT: China was lending to other countries on secret terms


China was lending to developing countries on secret terms that put other lenders at a disadvantage and gave China an advantage. The Financial Times reports this, citing an expert report.

faungg's photos via flickr
faungg's photos via flickr
Such an approach threatens to undermine efforts to reduce the debt of low-income nations, experts say. The authors of the report analysed a hundred contracts that China had entered into and found that there were confidentiality clauses. These made it difficult for other lenders to ascertain the true financial situation of the borrower.

In addition, a number of conditions affected the domestic and foreign policies of the borrowing countries. The Chinese banks also obliged countries to remove debt from the Paris Club restructuring list. This organisation handles the sovereign debt of borrowing countries to creditor nations. The PRC is at the top of the list of major sovereign lenders to developing countries.

Global debt rose to a record $281 trillion in 2020 - 3.5 times the size of the world economy itself. In just a year and a half, borrowing could rise to 300 trillion, experts say.

Debt rose by $24 trillion last year, a record pace. Almost half of the increase in debt burden came from advanced economies (USA, Japan, Eurozone, UK, South Korea).

source: ft.com