Enter the dragon: 75% loans to govts were from China post 2008 crisis

54 per cent of total loans given to African govts, 20 per cent each to governments in Asia and the Americas

The latest crisis emanating from Afghanistan has indeed dented the US’ hegemony, but its seeds were sown following the global financial crisis of 2008.

AIDdata on over 17,000 Chinese investments released last month showed that China had been dispensing more loans than grants in the form of help to countries. Now, a further analysis by Business Standard indicates that Chinese influence has been growing since 2008.

Until 2009, China had made commitments worth $32.6 billion (USD constant 2017), but in the following nine years (until 2017), its loans to governments and governments agencies increased to $138.3 billion--75 per cent of the loans were dispensed as the world was dealing with the effects of the global financial crisis. Nearly half of the total loans by the Chinese to governments and government agencies have been given in five years between 2013-17 as per AIDdata.

Given how Africa is considered the last frontier for the global economy, Chinese investments in Africa are skewed.

Of the total loans, 53.7 per cent have gone to African countries. In contrast, governments and government agencies in Asia and the Americas (read Latin America) account for 20 per cent of the funding each. The share of Middle-East, Europe and Oceania is in low single digits.

How much of these loans remain on the countries’ books is unclear, as comparable debt profiles are not available. Data indicates of the 106 governments which availed of loans from the Chinese, 60 had more than 1 per cent loan to GDP ratio.

For 12 nations, the loans to the government and government agencies amounted to over 10 per cent of their GDP (calculated on 2017 constant US$).

In Congo, Chinese loans accounted for a whopping 49 per cent of the 2020 GDP. For Angola, Ghana and Samoa, the loan to GDP ratio was higher than 20 per cent. For Sri Lanka, the loan to GDP ratio was 4.6 per cent, and for Pakistan, it was 2.3 per cent.

If co-financed loans are included, then the Chinese influence increases further. Moreover, if loans given to government agencies, state-owned companies, state-owned banks, public-private partnerships and special purpose vehicles are included, the amount dispensed increases five times. China gave, directly or indirectly, loans worth $989 billion to 128 countries across the world during this period.

But the significant trend here is that the share of Africa and Asia decreases to 27 per cent and 13.7 per cent, respectively. In contrast, the share of Americas and Europe increase to 31.1 and 19.2 per cent respectively. Most of the loans in the European subcontinent pertain to Russia, Turkey, Bulgaria and Belarus.

The inclusion of other government entities and co-financing increases Pakistan’s loan to GDP ratio to 3 per cent, whereas Sri Lanka’s ratio goes up by 5.6 per cent.