Jessie Yeung, CNN
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For the past decade, China has lent massive sums to governments across Asia, Africa and Europe, growing its global influence through its Belt and Road <\/a>infrastructure megaproject and becoming one of the world\u2019s biggest creditors.<\/p>\n\n\n\n Now, a new study<\/a> says Beijing has also become a major emergency rescue lender to those same countries, many of which are struggling to repay their debts.<\/p>\n\n\n\n Between 2008 and 2021, China spent $240 billion bailing out 22 countries that are \u201calmost exclusively\u201d Belt and Road project debtors, including Argentina, Pakistan<\/a>, Kenya and Turkey, according to the study published Tuesday by researchers from the World Bank, Harvard Kennedy School, Kiel Institute for the World Economy and the US-based research lab AidData.<\/p>\n\n\n\n Though China\u2019s bailouts are still smaller than those provided by the United States or the International Monetary Fund (IMF), which regularly makes emergency loans to countries in crisis, it has become a key player for many developing countries.<\/p>\n\n\n\n Beijing\u2019s rise as an international crisis manager looks familiar: The US has taken a similar strategy for nearly a century, offering bailouts for high-debt countries such as those in Latin America during the 1980s debt crisis, the report said.<\/p>\n\n\n\n \u201cWe see historical parallels to the era when the US started its rise as a global financial power, especially in the 1930s and after World War 2,\u201d it said.<\/p>\n\n\n\n But there are differences, too.<\/p>\n\n\n\n For one, China\u2019s loans are far more secretive, with most of its operations and transactions concealed from public view. It reflects the world\u2019s financial system becoming \u201cless institutionalized, less transparent, and more piecemeal,\u201d the study said.<\/p>\n\n\n\n China\u2019s central bank also doesn\u2019t disclose data on loans or currency swap agreements with other foreign central banks; China\u2019s state-owned banks and enterprises do not publish detailed information about their lending to other countries.<\/p>\n\n\n\n The research team instead relied on annual reports and financial statements of other countries that have agreements with Chinese banks, news reports, press releases and other documents to compile their dataset.<\/p>\n\n\n\n \u201cMuch more research is needed to measure the impacts of China\u2019s rescue loans \u2013 in particular, the large swap lines administered by the PBOC (People\u2019s Bank of China),\u201d said Brad Parks, a co-author of the study, in a blog post by AidData<\/a>. \u201cBeijing has created a new global system for cross-border rescue lending, but it has done so in an opaque and uncoordinated way.\u201d<\/p>\n\n\n\n In 2010, less than 5% of China\u2019s overseas lending portfolio supported countries in debt distress, according to the report.<\/p>\n\n\n\n By 2022, that figure had soared to 60% \u2013 reflecting Beijing\u2019s ramping up of rescue operations and stepping away from the infrastructure investments that had characterized its Belt and Road campaign in the early 2010s, it said.<\/p>\n\n\n\n Most of the loans were made in the last five years of the study, from 2016 to 2021.<\/p>\n\n\n\n Of the $240 billion in total bailout loans, $170 billion came from the PBOC\u2019s swap line network \u2013 meaning agreements between central banks to exchange currencies. The other $70 billion was lent by Chinese state-owned banks and enterprises, including oil and gas companies.<\/p>\n\n\n\n Most of the countries drawing from China\u2019s swap lines were deep in financial crisis, with problems exacerbated by the Covid-19 pandemic<\/a>, the report found.<\/p>\n\n\n\n For instance,\u00a0Argentina<\/a>\u00a0defaulted in 2014 and 2020 after struggling for decades with its national debt. Meanwhile, Pakistan saw its currency crash as\u00a0foreign exchange reserves dwindled.<\/a><\/p>\n\n\n\n Sri Lanka also borrowed money from China in 2021 \u2013 before its economic and political crisis boiled over the following year<\/a>, with basic goods like fuel and medicine rationed and crowds taking to the streets in violent protests.<\/p>\n\n\n\n But China\u2019s bailouts don\u2019t come cheap. The PBOC requires an interest rate of 5%, compared to 2% for IMF rescue loans, the study said.<\/p>\n\n\n\n And most of the loans are extended to middle-income countries considered more important to China\u2019s banking sector, whereas low-income countries get little to no new money and are offered debt restructuring instead.<\/p>\n\n\n\n \u201cBeijing is ultimately trying to rescue its own banks. That\u2019s why it has gotten into the risky business of international bailout lending,\u201d said study co-author Carmen Reinhart in the AidData post.<\/p>\n\n\n\nChina\u2019s loans<\/h2>\n\n\n\n
Belt and Road Initiative<\/h2>\n\n\n\n