Advertisment

China Spent $240 Billion Bailing Out Developing Countries Under "Belt and Road" Initiative: Study

author-image
BNN Correspondents
Updated On
New Update

China has spent $240 billion over the past 13 years bailing out 22 developing countries, with the majority of the lending taking place between 2016 and 2021, according to a report published on Tuesday by the World Bank, Harvard Kennedy School, AidData, and the Kiel Institute for the World Economy.

Advertisment

The bailout lending was primarily aimed at rescuing Chinese banks and mitigating the risks posed by their exposure to developing countries, particularly those that had taken out loans to build infrastructure under China's "Belt and Road" initiative.

The report revealed that lending by China to countries in debt distress soared from less than 5% of its overseas lending portfolio in 2010 to 60% in 2022. The top three beneficiaries of the bailout loans were Argentina, Pakistan, and Egypt, with Argentina receiving the most at $111.8 billion. The People's Bank of China's swap lines accounted for $170 billion of the financing, while bridge loans or balance of payments support by Chinese state-owned banks and companies was $70 billion.

The report was critical of some central banks that may have used the PBOC swap lines to artificially pump up their foreign exchange reserve figures. It also noted that China's rescue lending was "opaque and uncoordinated" and that China had been criticized for holding up debt restructurings with countries such as Zambia, Ghana, and Sri Lanka.

Advertisment

In response, China's foreign ministry spokesperson, Mao Ning, denied any wrongdoing and defended the country's overseas investments, saying that they operated on "the principle of openness and transparency" and that China "respects the will of relevant countries, has never forced any party to borrow money, has never forced any country to pay, will not attach any political conditions to loan agreements, and does not seek any political self-interest."

The report's authors, however, argued that China's bailout lending was a risky business for its banks and that it needed to be better coordinated with international organizations to ensure transparency and accountability. They also called on China to work with the World Bank and International Monetary Fund to offer debt relief to developing countries.

The bailout loans were mainly concentrated in middle-income countries that make up four-fifths of China's lending, while low-income countries were offered grace periods and maturity extensions, the report said. China's rescue lending has declined since 2016 as many projects have failed to pay the expected financial dividends, but it remains a contentious issue for the country and the developing world.

Advertisment
Advertisment