From 2008 to 2021, China spent around $240 billion bailing out 22 developing countries who have struggled to repay loans taken for the Belt and Road infrastructure projects, a study has revealed.
The report, published on Tuesday, was prepared by researchers from the World Bank, Harvard Kennedy School, AidData and the Kiel Institute for the World Economy.
The study notes that around 80 per cent of the bailout money was spent between 2016 to 2021, mainly in middle-income countries like Pakistan, Argentina, and Mongolia.
Argentina was the highest recipient with $111.8 billion, followed by Pakistan with $48.5 billion and Egypt with $15.6 billion. Nine countries received less than $1 billion.
It notes that China’s spending on Belt and Road infrastructure projects has tapered off since 2016 as many projects failed to yield rich dividends.
“Beijing is ultimately trying to rescue its own banks. That’s why it has gotten into the risky business of international bailout lending,” said Carmen Reinhart, a former World Bank chief economist and one of the study’s authors, according to the Reuters news agency.
Their research found out that Chinese loans to debt-laden countries spiked to 60 per cent of its overseas lending portfolio in 2022 from less than 5 per cent in 2010.
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Of the $240 billion bailout money, around $170 billion came from the People’s Bank of China (PBOC) swap lines, including those in Suriname, Sri Lanka, and Egypt.
Moreover, Chinese state-owned banks doled out $70 billion in bridge loans or balance of payments support, and rollovers for both types of loans amounted to $140 billion.
The study criticised some central banks for potentially using the PBOC swap lines to “artificially pump up their foreign exchange reserve figures.”
Brad Parks, one of the report’s authors, and director of AidData, a research lab at William & Mary College in the US, described China’s rescue lending as “opaque and uncoordinated.”
Their report further found out that China allocated one-fifth of its bailout money to middle-income countries because of the risk they pose to Chinese banks’ balance sheets, while the low-income countries were given grace periods and maturity extensions.
China is currently negotiating debt restructurings with countries like Sri Lanka, Ghana and Zambia and has been facing criticism for holding up the processes.
(With inputs from agencies)
