Belt and Road Debt Report Reveals China’s Outstanding Balance Exceeds $1 Trillion
A recent report highlights that China is the world’s largest official debt collector, with more than a trillion dollars in outstanding debt owed to Beijing through its Belt and Road project. The report notes that approximately 80% of these loans support countries facing financial difficulties.
China’s Belt and Road Initiative (BRI) has attracted participation from more than 150 countries, spanning from Uruguay to Sri Lanka. Over the past decade, China has provided substantial loans for infrastructure projects in low and middle-income nations, including bridges, ports, and highways.
However, a significant portion of these loans has now entered their principal repayment period, with projections indicating that 75% will be in this phase by the end of the decade. According to a report from AidData, a research institute specializing in development finance, China commits aid and credit totaling around $80 billion annually to low and middle-income countries. In contrast, the United States provides $60 billion to such nations each year.
The report highlights that China is now the world’s largest official debt collector, with outstanding debt from borrowers in the developing world to China amounting to at least $1.1 trillion. AidData estimates that around 80% of China’s overseas lending portfolio in the developing world supports financially distressed countries.
While proponents of the BRI argue that it promotes resource allocation and economic growth in the Global South, critics have raised concerns about opaque pricing for projects undertaken by Chinese companies. Some countries, such as Malaysia and Myanmar, have renegotiated deals to reduce costs.
China’s reputation has also taken a hit in recent years, with its approval rating among developing countries falling from 56% in 2019 to 40% in 2021. The report suggests that China is learning from its past mistakes and is becoming more adept at managing crises. Beijing is working to align its lending practices with international standards and is implementing stricter safeguards to protect itself from repayment risks, such as allowing key BRI lenders to access borrowers’ foreign currency reserves held in escrow.
This information sheds light on the complexities and challenges surrounding the Belt and Road Initiative and its impact on developing nations and global finance.
