China’s lending terms hinder post-virus debt negotiations

Beijing (AP) — China’s lending to poor countries in Africa and Asia imposes extraordinary secrets and repayment terms that undermine its ability to renegotiate post-pandemic debt of the coronavirus, the United States and Germany said. A group of researchers said in a report Wednesday.

This reflects warnings about China’s lending problems, which surged after Beijing launched the Belt and Road Initiative in 2012 to build rail and other infrastructure to expand trade with Asia, Africa and the Middle East. ..

China has become one of the largest lenders, especially for developing countries, as the ruling Communist Party strives to expand its global influence to align itself with its position as the world’s second-largest economy. ..

Unlike most public lenders, state-owned Chinese banks adhere to foreign borrowers and sometimes lend, according to researchers at William and Mary University in Virginia, the German Institute for World Economics, and Peterson. Demands that even the existence of is kept secret. Institute for International Economic Studies and Center for Global Development in Washington.

Banks in China insist on paying back ahead of other creditors, which could disrupt debt negotiations with a group of lenders, their report said. The borrower said it would need to put oil or other income into a foreign account that could be seized in the event of default.

The pandemic “has robbed many borrowers of their ability to repay,” but creditors “dislike renegotiating” without knowing what they owe to Beijing, at a laboratory at the University of William and Mary in Virginia. Bradley C., Secretary-General of Aid Data.

According to the report, Zambia in southern Africa is stuck in negotiations with bondholders who refuse to negotiate until they learn of China’s debt.

“The stakes are pretty high,” Parks said. “If China is not at the table when these countries are trying to renegotiate, it is very difficult for countries suffering from repayment to get out of the situation.”

Researchers have examined 100 contracts between Chinese lenders and government borrowers, worth a total of $ 36.6 billion in 24 countries. Of these, 84 lenders were the China Export-Import Bank or the China Development Bank.

Leaders in poor countries are welcoming Beijing’s lending, but Belt and Road is causing complaints that they have too much debt. Kenyan gas station operators went on strike in 2018 after a fuel tax was levied to repay a Chinese loan to the railroad.

Researchers want to encourage Beijing’s “soul quest” as to whether secrets or other restrictions are needed, Parks said. He said he wants the borrower to “be smarter about the need to do his homework before signing these contracts.”

According to Parks, Chinese officials received a copy of the report before the announcement and responded with “detailed written comments” emphasizing the need to “mitigate risk” in lending to weak economies.

“There was no demand for us to change anything,” he said. “They wanted to make sure their point of view was understood.”

China’s official secrecy has fueled complaints that its aid and lending may support a corrupt government or fall below the environmental and human rights standards that Western donors are trying to enforce.

Belt and Road officials say the initiative will benefit all countries involved and that lending will be on commercial terms rather than aid.

Chinese leaders say they allow the interest owed by Belt and Road borrowers and want to make debt easier to manage. However, Wednesday’s report said Ecuador could be reminded of its secret terms by Chinese bankers and future loans could be jeopardized after loan details were leaked.

Researchers led by AidData published their first report in 2013 focusing on China’s financing of Africa.

According to a 2017 report, China was almost comparable to the United States as a source of official grants and loans, but many benefited Beijing’s economic interests rather than recipients’ economic interests. is. According to a 2018 report, China-funded railroads in Africa and Asia are helping to reduce economic inequality between regions within the country.


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