The China Belt and Road Initiative has left many low-income and middle-income countries in the grip of $ 385bn “hidden debt”.
New research shows that international debt linked to what President Xi Jinping has written abroad has been talked about for years. This has led to an increase in “hidden debts”, or undisclosed loans that governments may be forced to repay.
The findings are part of a new report published by AidData, a global development research laboratory based at College William & Mary in Virginia, which analyzes more than 13,000 support services – and loans that pay more than $ 843bn in 165 countries, 18 to 18 years end of 2017.
AidData analysts say the existing debt to lend to China is “much larger” than it already is felt by credit bureaux and other government agencies with regulatory responsibilities.
“It really took my breath away when we first realized [$385bn figure], ”Brad Parks, chief executive of AidData, told the Financial Times.
Rental rates on Belt and Road have declined over the past two years. And this year the US has spearheaded the G7’s efforts to curb Beijing’s dominance over the global economy.
But the report shows the stability of the radical change since Xi launched the Belt and Road system in 2013.
Where lending in China has long been mainly to lenders such as central banks, now, about 70% of China’s foreign loans are provided in state-owned enterprises, state-owned banks, private vehicles, co-operatives and private institutions.
More than 40 small and medium-sized countries (LMIC) now owe China more than 10 percent of their global assets, AidData says.
And the LMIC local government is not talking about giving back to China with about 6% of GDP.
“These loans are largely based on government securities in developing countries. What is important is that many of them benefit from the visible or immovable forms of security of government action. This undermines the distinction between private and public debt, “Parks said.
The report was released at the start of a global conflict over fears of China forcing developing countries to enter. the so-called debt traps, which could ultimately lead to Beijing’s takeover if the debt is not repaid.
Some critics say the grievances were met with outrage over the growing Chinese interest outside Xi.
A 2020 Study and the China Africa Research Initiative at Johns Hopkins University found that between 2000 and 2019 China withdrew $ 3.4bn of debt from Africa and another $ 15bn was rescheduled. No property was confiscated.
Parks said, despite the “false myths that have been going on for some time and that the Chinese tend to trade in material goods, nonsense”, a recent study shows that water cooperation is widespread.
“It is a fact that Chinese government lenders are very fond of cooperation: we find that 44% of all lending rates are available, and the higher the interest rate, the more security it generates,” he said.
“The fact is that the Chinese State Bank has enacted a law requiring the lender to have a minimum amount of money in a maritime bank account, or escrow account, which the lender directs.”
The debt he faced to repay the debt was seen as “dangerous” in many countries, Parks said.
“If you are in the Ministry of Finance in a developed country the problem of reducing China’s hidden debt is less than knowing that you will have to repay indebtedness to China.