Chinese Loans To Other Countries Are Predatory - New ReportChinesse President, Xi Jinping

China has become the largest global overseas creditor accounting for close to 65 percent of the world’s official bilateral debt with outstanding foreign debt estimated to be around USD 5.6 trillion in 2020, in fact, loans from the Asian country have surpassed lending by the World Bank and the International Monetary Fund combined together. 

In a White Paper released in January 2021, China dubbed its lending as ‘international development cooperation within the framework of south-south cooperation’ which it is undertaking as a ‘responsible member of the global community’ however, the empirical evidence could be further from the truth.

A report from Fabien Baussart, which was published as a blog post of The Times of Israel which has been perused by Africa Today News, New York explained that contrary to China’s claims of its lending being a ‘global public good’ laying the foundation of a robust ‘development cooperation’ framework, it has been seen that Chinese loans are predatory and opaque in nature, with terms that are heavily skewed against the borrowing country which has risks written all over it.

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Moreover, contrary to common perception, the bulk of Chinese loans (nearly 60 per cent) are offered at commercial rather than concessional rates, which is unusual for overseas “development assistance”, says Baussart.

China has always maintained that its overseas lending follows a “no-strings-attached” approach and respects other countries’ right to select “their own development path” with a focus on “developing countries’ control”.

The stark differences between the rhetoric and reality of Chinese overseas lending are further revealed in a recent (April 2021) report titled “How China Lends: A Rare Look into 100 Debt Contracts with Foreign Governments”, reported The Times of Israel.

As per the study, a comparison of Chinese and non-Chinese loan contracts reveals that the former is characterised by extremely stringent terms of lending.

These include strict confidentiality clauses barring borrowers from revealing loan terms and often even the very existence of a loan.

This is not in line with the disclosure standards of the development assistance extended by the Organization for Economic Cooperation and Development (OECD) countries and creates a problem of “hidden debt” in the recipient country resulting in underestimation of actual levels of debt distress. It also leads to a tendency for governments to over-borrow since the public is unaware of the actual debt, says the report.

AFRICA TODAY NEWS, NEW YORK