China’s loans to poor countries in Africa and Asia impose unusual secrecy and repayment terms that hurt their ability to renegotiate debts after the coronavirus pandemic, a group of American and German researchers said on Wednesday in a report.
He echoes warnings about problems with Chinese loans, which exploded after Beijing launched its Belt and Road Initiative in 2012 to expand trade with Asia, Africa and the Middle East by building railroads. iron and other infrastructure.
China has become one of the biggest lenders, especially to developing countries, as the ruling Communist Party strives to expand its global influence to match the country’s status as the second largest economy.
China’s state-owned banks, unlike most official lenders, require foreign borrowers to keep the terms and sometimes even the existence of loans secret, according to researchers from the College of William and Mary in Virginia, the German Kiel Institute for the World Economy and the Peterson Institute for International Economics and the Center for Global Development in Washington.
Chinese banks insist on being repaid before other creditors, which can disrupt debt negotiations with groups of lenders, according to their report. He said borrowers are required to place oil or other revenues in foreign accounts which can be seized in the event of default.
The pandemic “has undermined many borrowers’ ability to repay,” but creditors are “reluctant to renegotiate” without knowing what is owed to Beijing, said Bradley C. Parks, executive director of AidData, a lab at the College of William and Mary in Virginia. .
Zambia in southern Africa is deadlocked in talks with bondholders who refuse to negotiate until they know about its Chinese debts, according to the report.
“The stakes are pretty high,” Parks said. “If China is not at the table when these countries try to renegotiate, it is very difficult for countries in repayment difficulty to get out of this situation.”
The researchers looked at 100 contracts between Chinese lenders and government borrowers in 24 countries worth a total of $36.6 billion. The lender for 84 of them was the Export-Import Bank of China or the China Development Bank.
Leaders of poor countries welcome loans from Beijing, but Belt and Road has led to complaints that they are left with too much debt. Kenyan gas station operators went on strike in 2018 after a fuel tax was imposed to pay off Chinese loans for a railway.
The researchers hope to encourage Beijing’s “introspection” of the need for secrecy and other restrictions, Parks said. He said they hoped borrowers would “smartly understand the need to do their homework before signing these contracts”.
Chinese officials received a copy of the report before it was released and responded with “detailed written comments” stressing their need to “mitigate risk” by lending to weak economies, Parks said.
“There was no request for us to change anything,” he said. “They wanted to make sure their point of view was understood.”
China’s official secrecy has fueled complaints that its aid and loans could prop up corrupt regimes or undermine environmental and human rights standards Western donors are trying to uphold.
Belt and Road officials say the initiative benefits all countries involved and that the loans are given on commercial terms and not on aid.
Chinese leaders have written off interest owed by some Belt and Road borrowers and say they want to keep the debt manageable. Wednesday’s report noted, however, that Chinese bankers had reminded Ecuador of its confidentiality terms and indicated that future loans could be jeopardized following leaked loan details.
Researchers led by AidData published their first report in 2013 focusing on Chinese financing in Africa.
In 2017, a report found that China was close to matching the United States as a source of official grants and loans, but said much of it served Beijing’s economic interests rather than those of the beneficiaries. A 2018 report found that Chinese-funded railways in Africa and Asia helped reduce economic inequalities between regions within countries.
AidData: https://www.aiddata.org/
