China spent $240 billion to bail out nations with Belt & Road loans

Beijing now fast catching up with the IMF as a lender of last resort

China spent $240 billion bailing out 22 developing countries between 2008 and 2021, with the amount soaring in recent years as more have struggled to repay loans spent building ‘Belt and Road’ infrastructure, a study published on Tuesday showed.

80 per cent of the lending was made between 2016 and 2021, mainly to middle-income countries including Argentina, Mongolia and Pakistan, according to the report by researchers from the World Bank, Harvard Kennedy School, AidData, and the Kiel Institute for the World Economy.

China has lent hundreds of billions of dollars to build infrastructure in developing countries, but lending has tailed off since 2016 as many projects have failed to pay the expected financial dividends. “Beijing is ultimately trying to rescue its own banks. That’s why it has gotten into the risky business of international bailout lending,” said Carmen Reinhart, a former World Bank chief economist and one of the authors.

Chinese loans to countries in debt distress soared from less than 5 per cent of its overseas lending portfolio in 2010 to 60 per cent in 2022, the study found.

Argentina received the most, with $111.8 billion, followed by Pakistan with $48.5 billion and Egypt with $15.6 billion. Nine countries received less than $1 billion.

The People’s Bank of China’s (PBOC) swap lines accounted for $170 billion of the financing, including in Suriname, Sri Lanka and Egypt. Bridge loans or balance of payments support by Chinese state-owned banks and companies was $70 billion. Rollovers of both kinds of loans were $140 billion.

The study was critical of some central banks potentially using the PBOC swap lines to artifically pump up their foreign exchange reserve figures.

China’s government hit back at the criticism, saying its overseas investments operated on “the principle of openness and transparency”.

“China acts in accordance with market laws and international rules, 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,” foreign ministry spokesperson Mao Ning said on Tuesday.

The bailout loans are mainly concentrated in the middle income countries that make up four-fifths of its lending, due to the risk they pose to Chinese banks’ balance sheets, whereas low income countries are offered grace periods and maturity extensions. China is negotiating debt restructurings with countries including Zambia, Ghana, and Sri Lanka and has been criticised for holding up the processes. In response, it has called on the World Bank and IMF to also offer debt relief.

Beijing anti-graft agency to inspect major state-owned companies

China’s top anti-corruption agency will inspect dozens of state-owned companies from China Investment to PetroChina, suggesting the government may be expanding its push to boost profits at some of the country’s biggest and most important state firms.

The Central Commission for Discipline Inspection said late Monday it will carry out checks on more than 30 companies, also naming China Petroleum & Chemical  or Sinopec, China Everbright Group, and China Development Bank. 

The announcement did not provide specifics on how the probe will play out. 

China has been pushing for state-owned enterprises to improve their efficiency and profitability for years.
 

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We are all Chinese: Former Taiwan president Ma during China visit

People on both sides of the Taiwan Strait are ethnically Chinese and share the same ancestor, former Taiwan President Ma Ying-jeou said on Tuesday at the start of a historic visit to China that Taiwan’s ruling party has criticised.

Ma, in office from 2008-2016, is the first former or current Taiwanese president to visit China since the defeated Republic of China government fled to Taiwan in 1949 at the end of a civil war with the Communists.

“People on both sides of the Taiwan Strait are Chinese people, and are both descendants of the Yan and Yellow Emperors,” Ma said. 

Ma, a senior KMT member, said he hoped for peace.

- Reuters