Hong Kong (CNN) Over the past decade, China has provided huge sums of money to governments across Asia, Africa and Europe, increasing its global influence through gigantic infrastructure projects and becoming one of the world’s largest creditors.
now, New study He says Beijing has also become a major lender of emergency bailouts to those same countries, many of which are struggling to pay off their debts.
Between 2008 and 2021, China spent $240 billion to bail out 22 countries “almost exclusively” in the Road and Belt infrastructure project, including Argentina, PakistanKenya and Turkey, according to the study published on Tuesday by researchers from the World Bank, the Harvard Kennedy School, the Keele Institute for the World Economy and the US-based research laboratory AidData.
Although China’s bailouts are still smaller than those offered by the United States or the International Monetary Fund (IMF), which regularly provides emergency loans to countries in crisis, it has become a major player for many developing countries.
Beijing’s rise as an international crisis manager sounds familiar: The United States pursued a similar strategy for nearly a century, offering bailouts to heavily indebted countries like those in Latin America during the debt crisis of the 1980s, according to the report.
“We see historical parallels to the era when the United States began its rise as a global financial power, especially in the 1930s and after World War II,” she said.
But there are differences too.
First, China Loans is more secretive, with most of its operations and transactions hidden from view. It reflects that the global financial system has become “less institutionalized, less transparent and more fragmented,” the study said.
The Chinese central bank also does not disclose data on loans or currency swap agreements with other foreign central banks; China’s state-owned banks and companies do not publish detailed information on their lending to other countries.
Instead, the research team relied on annual reports, financial statements of other countries that have agreements with Chinese banks, news reports, press releases, and other documents to compile their data set.
Brad Parks, one of the study’s authors, said: Blog post by AidData. “Beijing created a new global system for cross-border rescue lending, but it did so in an opaque and uncoordinated way.”
In 2010, less than 5% of China’s external lending portfolio supported countries in debt distress, according to the report.
By 2022, that number will rise to 60% – reflecting Beijing’s ramping up of bailouts and its distancing from the infrastructure investments that characterized the Belt and Road campaign in the early 2010s.
Most of the loans were made in the last five years of the study, from 2016 to 2021.
Of the $240 billion in total bailout loans, $170 billion came from the People’s Bank of China’s swap line network — meaning agreements between central banks to exchange currencies. Another $70 billion was lent by Chinese state-owned banks and companies, including oil and gas companies.
Most of the countries derived from the Chinese barter lines were in a deep financial crisis, with the problems exacerbated by COVID-19 pandemicfound the report.
For example, Argentina It faltered in 2014 and 2020 after struggling for decades with its national debt. Meanwhile, Pakistan witnessed the collapse of its currency as Foreign exchange reserves dwindled.
Sri Lanka also borrowed money from China in 2021 – before its economic and political crisis Boiled the following yearwith basic commodities such as fuel and medicine rationed and crowds taking to the streets in violent protests.
But Chinese bailouts do not come cheap. The study said the People’s Bank of China is asking for an interest rate of 5%, compared to 2% for bailout loans from the International Monetary Fund.
Most of the loans are given to middle-income countries that are more important to China’s banking sector, while low-income countries get little or no new money and are offered debt restructuring instead.
“Beijing is ultimately trying to bail out its banks. That’s why it got into the risky business of international rescue lending,” said Carmen Reinhart, a co-author of the study in the AidData publication.
Belt and Road Initiative
for a decade, Belt and Road Initiative in Beijing It pumps billions of dollars into infrastructure projects every year: paving highways from Papua New Guinea to Kenya, building ports from Sri Lanka to West Africa, and providing power and communications infrastructure for people from Latin America to Southeast Asia.
It was first announced in 2013 during the reign of Chinese leader Xi Jinping. The initiative was seen as an extension of the country’s steep rise to world power.
As of March 2021, 139 countries have signed on to the initiative, representing 40% of global GDP, according to the Council on Foreign Relations, a US think tank. The Belt and Road Initiative has reached nearly $1 trillion in Chinese investment, according to China’s Ministry of Foreign Affairs.
But funding shortfalls and political resistance have hampered some projects, while others have been marred by environmental accidents, corruption scandals and labor abuses.
There is also public concern in some countries about issues such as excess debt and the influence of China. Accusations that the Belt and Road Initiative is a vast “debt trap” designed to control local infrastructure, while largely dismissed by economists, have tarnished the initiative’s reputation.
CNN has reached out to PBOC for comment.
In January, Chinese Foreign Minister Chen Gang dismissed China’s accusations of creating a “debt trap” in Africa, a major recipient of Belt and Road investment.
In a statement citing Chen, the ministry claimed that “China has always been committed to helping Africa relieve its debt burden,” and referred to debt relief agreements Beijing has with a number of African countries.
Chen defended BRI again earlier this month, calling it a “public benefit.”
“China should be the last to be accused of the so-called debt trap,” he said, blaming the US interest hike for worsening debt in developing countries.
CNN’s Beijing bureau contributed to this report.
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