Construction for a while, debtor forever – Mir – Kommersant
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The One Belt, One Road Initiative, announced by Chinese leader Xi Jinping in 2013 as a large-scale project for the development of trade and economies of countries, eventually turned China into one of the world leaders in lending to other countries. And as noted in the AidData report, if at first China’s partners took loans from it for the implementation of projects, now they are massively borrowing funds from it to pay off the original debts.
Over the past decade, China has been actively lending billions of dollars to countries in Asia, Africa and Europe for the implementation of infrastructure projects under the Belt and Road Initiative (BRI). Thanks to this, he became one of the largest creditors on the planet. But as researchers from the World Bank, the Harvard Kennedy School, the Kiel Institute for World Economy and the American research laboratory AidData found out, in recent years China has managed to become one of the main saviors of the world economy.
According to the new research According to AidData, China issued emergency loans to countries in economic hardship between 2000 and 2021 alone, totaling about $240 billion. Of these, $185 billion were issued only in the last five years (from 2016 to 2021).
A total of 22 countries have been recipients of this assistance. Almost all of them are BRI members with low or middle income. And all of them are China’s debtors for BRI projects.
In addition, the authors found that China is actively using currency swaps to provide emergency assistance to its partners.
The PRC started using this tool in 2008 and has since signed agreements with 40 central banks. An analysis of the financial statements of banks in these countries showed that of the $240 billion in emergency loans issued by China, $170 billion were issued in the form of swap lines. And the remaining $70 billion – state-owned banks and enterprises of China, including oil and gas companies.
The authors of the report conclude that China systematically resorts to emergency financial assistance to BRI partner countries so that they can continue to pay on loans issued by China earlier for the implementation of various projects within the same BRI.
China is doing the same thing as the International Monetary Fund and the United States, the authors of the report say.
The difference is only in scale (the volume of Chinese assistance is many times more modest), as well as in the price that debtors have to pay for this assistance. Thus, the annual rate on loans from the IMF is 2%, while from the Central Bank of China it is 5%.
The very idea of making economically weak countries their debtors in order to increase their own influence in the international arena, and completely repeats the policy of the United States. “We see historical parallels with the era when the US began its journey to becoming a global financial power, especially in the 1930s and after World War II,” the report says.
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