The terms of the Chinese regime’s credit agreements with developing countries are eerily secretive and conceal onerous conditions. Among other controversial requirements, they oblige borrowers to prioritize repaying Chinese state-owned banks over other creditors, a study of more than 100 contracts signed between the Chinese regime and developing nations showed Wednesday.

The data set was compiled over three years by AidData, a U.S. research lab at the College of William & Mary. As reported by AP News, the database comprises more than 100 Chinese loan contracts with 24 low- and middle-income countries, some of which are suffering from growing debt burdens in the aftermath of the CCP pandemic.

In recent years, the Chinese regime became the world’s largest creditor, accounting for 65% of official bilateral debt worth hundreds of billions of dollars in Africa, Eastern Europe, Latin America, and Asia. 

The main target of the Chinese regime’s lending business is developing or underdeveloped countries. From what has been analyzed in the contracts and the evidence of the last years, the business of the regime is not only the one generated from the interest rates for the money loans but also the conditions demanded in exchange for them, which range from imposing purchases to Chinese companies to the creation of military bases or research centers in different areas of interest. 

On the other hand, the regime’s conditions are much more likely to be accepted by impoverished countries, which generally have higher political corruption rates. The need to receive the capital flows also leads them to accept derisory conditions. 

Researchers from AidData, the Washington-based Center for Global Development (CGD), Germany’s Kiel Institute, and the Peterson Institute for International Economics compared Chinese loan contracts with other major lenders to produce the first systematic assessment of the legal terms of Chinese regime loans abroad. 

Their analysis concluded that several unusual features exist in the agreements and that they imposed extreme contractual tools to increase the chances of repayment, they said in a 77-page report.

The contractual tools include confidentiality clauses that seek to prevent borrowers from disclosing loan terms, informal collateral agreements that benefit Chinese lenders over other creditors, and promises to keep debt out of collective restructurings, which the authors call “non-Paris Club” clauses. Also, the contracts give substantial leeway for China to write off loans or accelerate repayments.

This is not the first time that the Chinese regime’s credit system has come under criticism. The international think tank Gatestone Institute also questioned the so-called “debt traps,” with which the Chinese Communist Party (CCP) grants loans to developing countries and then permanently subjugates them.

” A few of these bilateral packages appear contrived to imprison already impoverished states into realms of permanent economic vassalage to China,” noted The Gatestone Institute in a report published in 2020. 

In this sense, the CCP would be using the Belt and Road initiative for strategic, political, and economic purposes to turn countries into their dependents, changing the established democratic order into one “dominated solely” by it.

Although the Belt and Road initiative was initially devised to boost trade with Europe, Chinese leader Xi Jinping oriented it towards economic aid for all countries along the route, later including many other countries outside the route. 

In addition to achieving economic dominance, the CCP would obtain the debtor countries’ silence in the face of the terrible human rights violations perpetrated by it.

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