Financial Times reported on September 11th that China, the world’s biggest bilateral lender, has given out tens of billions of dollars in secretive emergency loans to debt-distressed nations in recent years, competing fiercely with the International Monetary Fund (IMF).
Data from a U.S.-based think tank, AidData, show that Beijing has doled out a collective $32.8 billion to its three largest borrowers, including Pakistan, Sri Lanka, and Argentina since 2017.
These loans are part of the communist regime’s $838 billion Belt and Road Initiative (BRI), making it the largest investor in public works worldwide and surpassing the World Bank.
According to the report, however, some analysts think these emergency loans cannot help those at risk of financial crises but rather serve other CCP’s plans.
Analysts believe that the primary goal of Beijing’s emergency loan is to avoid defaults on infrastructure loans it gave through the BRI. Moreover, these lendings would likely help it avert potential full-blown crises such as those that hit Asia in 1997 and Latin America in the 1980s.
The outlet also noted that the CCP operates its rescue lending mostly in secret and does not announce credit details publicly like the IMF, in terms of credit lines, debt relief, and restructuring programs to borrower nations.
He said, “Beijing has tried to keep these countries afloat by providing emergency loan after emergency loan without asking its borrowers to restore economic policy discipline or pursue debt relief through a co-ordinated restructuring process with all major creditors.”
Parks explained that when this happens, the CCP “effectively kicks the can down the road and leaves it to others to solve the underlying solvency problem.”
He pointed out that the CCP’s help is sometimes not enough in the case of Sri Lanka’s economic crisis, which defaulted on $47 billion of external debt at the end of 2021.
The Liberty Times, citing data from the World Bank, reported that the total debt repayment to be settled this year by the world’s poorest nations is $35 billion, and 40% of it is owed to China.
Based on this calculation, the media outlet states that the total debt owed to China is equivalent to $14 billion and will likely become the regime’s bad debt. However, this figure has not yet included other hidden obligations which are difficult to estimate.
In late August, Beijing said it would forgive 23 interest-free loans to 17 African countries but did not specify how much the loans were worth.
Reuters noted that the interest-free lending the CCP has pledged to waive accounts for only a tiny amount of total loans to Africa.
Data from the research institute AidData show that between 2000 and 2017, Beijing’s interest-free loans made up less than 5% of its $843 billion loan commitments to 165 governments worldwide.