China Spends Billions Bailing Out Countries Caught in ‘Belt And Road’ Debt Trap
President Xi Jinping’s ‘Belt and Road Initiative’ is in huge financial trouble as Beijing is forced to bail out countries deeply indebted by Chinese infrastructure projects, new research shows.
Since 2020, Beijing “renegotiated” $78.5 billion worth of loans with partner countries failing to pay for costly airports, ports, and other infrastructure projects constructed by Chinese companies, a study released by the New York-based think tank Rhodium Group disclosed.
Under the Belt and Road program, China has already invested a trillion dollars in constructing roads, railways, and power grids in nearly 70 countries across Asia, the Middle East, Europe, and Africa. The project seeks to increase Chinese global influence and open foreign markets for its cheap exports.
On Monday, the British newspaper The Financial Times reported the Rhodium Group’s study:
China’s $1tn Belt and Road Initiative infrastructure finance programme has been hit by spiralling bad loans, with more than $78bn-worth of borrowing turning sour over the past three years.The scheme made China the world’s largest bilateral creditor, but the figures suggest it has become a financial millstone for Beijing and its biggest banks.About $78.5bn of loans from Chinese institutions to roads, railways, ports, airports and other infrastructure around the world were renegotiated or written off between 2020 and the end of March this year, according to figures compiled by New York-based research organisation the Rhodium Group.This is more than four times the $17bn in renegotiations and write-offs recorded by Rhodium in the three years from 2017 to the end of 2019.There are no official figures for the total scale of BRI lending over the past decade, but it is believed to total “somewhere in the ballpark of $1tn”, according to Brad Parks, executive director of AidData at William and Mary university in the US.In addition, Beijing has extended an unprecedented volume of “rescue loans” to prevent sovereign defaults by big borrowers among about 150 countries that have signed up to the BRI.The value of such sovereign bailouts amounted to $104bn between 2019 and the end of 2021, according to a study by researchers at AidData, the World Bank, Harvard Kennedy School and Kiel Institute for the World Economy. Over a longer timeframe between 2000 and the end of 2021, such bailouts to developing countries totalled $240bn, the study found.Increasing numbers of BRI borrower countries are being pushed to the brink of insolvency by a slowdown in global growth, rising interest rates and record high debt levels in the developing world. Those countries’ western creditors, meanwhile, have blamed China for blocking debt restructuring negotiations.
Another comprehensive study released last month painted an even grimmer picture of China’s trillion-dollar bid for global dominance. “Between 2008 and 2021, China issued $240 billion (€221.7 billion) in bailout loans to 22 countries,” Germany’s DW TV reported, citing a World Bank study.
“According to the report, Argentina received the most rescue loans from China, totaling $111.8 billion. It was followed by Pakistan with $48.5 billion and Egypt with $15.6 billion,” the German broadcaster added.
Mongolia, Sri Lanka, and Suriname also “received significant sums” in bail-out money, the World Bank report said.
The revelations vindicate former U.S. President Donald Trump’s administration, which warned developing countries against falling into the Beijing debt trap. China was creating “an unsustainable debt burden” for poor countries, the then-U.S. Secretary of State Mike Pompeo cautioned in 2020.
The news comes as China wants countries in the Middle East, Africa, and South America to sign trade agreements based on the yuan, a currency the Communist regime keeps artificially low to make its export more attractive.
Following President Lula da Silva’s recent state visit, China eyes Brazil as a potential bridgehead for making further inroads into South America. “Beijing is trying to broaden its political and economic influence in Latin America amid tensions with the United States,” The South China Morning Post reported last week.
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