According to Breibart, a recently published report by the AidData Project at the College of William and Mary in Virginia, China’s Belt and Road Initiative (BRI) is supported by the Chinese Communist Party (CCP). The CCP promotes it to assist emerging economies, which benefit the CCP while also “assisting their partners,” increasingly mired in mounting debt burdens.
Research from international development research lab AidData said that Hundreds of lower-income governments are saddled with debt that isn’t on their balance sheets. It’s due to President Xi Jinping’s Belt and Road Initiative, which involves opaque partnerships with state banks and corporations.
The massive loans to BRI projects are made on “less generous terms than OECD loans,” AidData said. For example, while the OECD average interest rate is 1% and the repayment term is 28 years, the BRI imposes a loan interest rate of 4.2% and a significantly shorter repayment term, averaging less than ten years. Since the program’s inception in 2013, China has invested more than $843 billion in constructing roads, bridges, ports, and hospitals in 163 countries, including many in Africa and Central Asia.
The report also emphasizes that China’s foreign loans have higher interest rates and require collateral and credit insurance conditions for more prominent and riskier development projects. Nearly 70% of this amount has been lent to state-owned banks or joint ventures between Chinese businesses and local partners in countries already heavily indebted to Beijing, according to AidData executive director Brad Parks.
Anger is growing over the amount of Chinese money pouring into places like Balochistan in southwestern Pakistan. Residents say they receive minimal benefit, and militants have launched a series of attacks to destroy the country, undermining Chinese investment.
According to AidData, “the debt burden from China that debtors are carrying is much larger than what research institutions, rating agencies, or intergovernmental organizations with responsibility for monitoring detect.” According to the report, “42 countries currently have Chinese public debt that exceeds 10% of GDP.” Eight of those countries have debts that exceed 30% of their GDP.
“We’re seeing buyer remorse right now with the Belt and Road Initiative,” Parks said. “Many foreign leaders who were eager to join the BRI are now suspending or canceling Chinese infrastructure projects due to debt sustainability concerns.”
One topic covered in the AidData report that is easier to investigate than many other criticisms of China is “debt-trap diplomacy,” which hypothesizes that China encourages developing countries to borrow money they don’t have. Those countries can not pay, allowing China to seize their national assets and squeeze their debt.
Mr. Parks stated that the team’s research indicates that China prefers to “collateralize loans with illiquid assets rather than physical infrastructure,” even though there are already some spectacular examples of collateral.
AidData concludes that Chinese banks generally believe they can profit from grants by looking at thousands of BRI projects spanning many countries rather than just a few geopolitical examples.
“It’s unusual for Beijing to accept mortgages as illiquid assets.” They’re more intelligent than that. “What they want is a cash mortgage, a liquid asset that they can take with them,” Parks explained.