By Rachel Savage and Clare Baldwin
JOHANNESBURG/HONG KONG (Reuters) – Chinese financial institutions lent $1.34 trillion to developing countries between 2000 and 2021, U.S. researchers at AidData said in a report showing the world’s largest bilateral lender is moved from infrastructure loans to bailout loans.
While loan commitments peaked at nearly $136 billion in 2016, China still committed to nearly $80 billion in loans and grants in 2021, according to the data, which covers nearly 21,000 projects in 165 low- and middle-income countries, probably the most comprehensive dataset of its kind. .
Foreign funding has won Beijing’s allies in the developing world, while drawing criticism from the West and some recipient countries, including Sri Lanka and Zambia, that infrastructure projects they financed imposed a debt on them that they were not able to repay.
The sources and direction of Chinese overseas financing have changed, the data shows.
In 2013, when President Xi Jinping launched the Belt and Road Initiative to build infrastructure in the developing world, Chinese policy banks accounted for more than half of the loans. Their share started to decrease from 2015 and was 22% in 2021.
The People’s Bank of China and the State Administration of Foreign Exchange (SAFE), which manages China’s foreign currency reserves, accounted for more than half of loans in 2021, almost all bailout loans.
“Beijing finds itself in an unfamiliar and uncomfortable role as the world’s largest official debt collector,” said the report from AidData, a research lab at the University of William and Mary.
Much of China’s growing bailout loans are denominated in renminbi, the report said, with Chinese currency loans surpassing the U.S. dollar in 2020. Arrears to Chinese lenders have also increased.
China notably manages repayment risk by using foreign currency escrow accounts that it controls, AidData said. The deal is controversial because it gives China debt priority, meaning other lenders, including multilateral development banks, could be paid second in any coordinated debt relief.
AidData identified 15 countries, mainly in Africa, with escrow accounts totaling $2.5 billion at their peak in June 2023.
Brad Parks, the lead author of the study, said they weren’t able to identify all of these accounts because they normally remain confidential. He noted, however, that they had found secured loans worth $614 billion and that cash was the main source of collateral required by Chinese lenders, indicating that the amount in escrow accounts could be much higher. at $2.5 billion.
China is also working more with Western multilateral lenders and commercial banks. Half of its non-emergency loans in 2021 were syndicated loans, 80% of which were from Western banks and international financial institutions.
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The destinations of Chinese overseas loans have also changed. Loan commitments to African countries fell from 31% of the total in 2018 to 12% in 2021, while loans to European countries almost quadrupled to 23%.
Another data set shows that loan commitments to African countries fell to a 20-year low in 2022.