Chinese loans to other countries are “predatory and opaque”: Report



China became “the world’s largest overseas lender” as Beijing’s lending exceeded the combined lending of the World Bank and the International Monetary Fund. According to the Times of Israel blog, Chinese loans account for about 65% of the world’s official bilateral debt, and the external debt outstanding in 2020 is estimated at about $ 5.6 trillion. In a White Paper published in January this year, China dubbed its lending as “international development cooperation through South-South cooperation,” which it pursues as a “responsible member of the global community.”

However, the empirical evidence may be further from the truth, according to Fabienne Baussard, founder and president of the Center for Political and Foreign Affairs (CPFA) think tank. In a blog post to the Times of Israel, he said that despite what China called its loans a “global public good” and laid the foundation for a solid foundation of “development cooperation”, he witnessed Chinese loans being “predatory and opaque. ” ‘ in nature. The blog notes that some of China’s lending conditions are “highly distorted” in relation to the borrowing country.

In addition, China is driving developing countries into economic dependence and political leverage through the “highly unacceptable” level of debt created for these countries. This reportedly has serious implications for their degree of sovereignty over Beijing. Taking a more detailed picture of Chinese loans, contrary to popular belief, most of the nearly 60% of loans are offered at commercial rather than preferential rates. Baussart notes that this is unusual for overseas “development aid.”

But China says “no strings attached”

The explosive blog post came even when China has always argued that its foreign creditors adhere to the no strings attached principle. China also said it respects the right of other countries to choose “their own development path” with an emphasis on “controlling developing countries.” In a blog The Times of Israel revealing the stark differences between China’s rhetoric and the reality of its overseas lending, Bausart cited a report titled “How China Grants Lending: A Rare Look at 100 Debt Contracts with Foreign Governments.”

A joint study by Germany’s Keele Institute and Washington-based Center for Global Development, Aid Data and the Peterson Institute for International Economics analyzed at least a hundred of China’s loan agreements with 24 developing countries between 2000 and 2020. It also compares loans with 142 contracts with non-Chinese foreign debt with 28 commercial, bilateral and multilateral lenders. After comparison, the study concluded that Chinese loans are characterized by extremely strict lending conditions, including strict confidentiality clauses prohibiting the borrower from disclosing the terms of the loan and often “the very existence of the loan.”

IMAGE: Unsplash / AP


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