A Chinese engineer on a Belt and Road project site in Hambantota, Sri Lanka. Colombo is urging China and other creditors to reach a compromise on debt restructuring © Paula Bronstein/Getty Images
LONDON: China has expanded its bailout lending as its Belt and Road Initiative (BRI) blows up following a series of debt write-offs, scandal-ridden projects and allegations of corruption, according to Financial Times.
The FT report said China granted $104bn worth of rescue loans to developing countries between 2019 and the end of 2021.
The study by researchers at AidData, World Bank, Harvard Kennedy School and Kiel Institute for the World Economy is the first known attempt to capture total Chinese rescue lending on a global basis, the FT report said.
According to the report, between 2000 and the end of 2021, China undertook 128 bailout operations in 22 debtor countries worth a total of $240bn.
The FT report said that China’s emergence as a highly influential “lender of last resort” presents critical challenges for western-led institutions such as the IMF, which have sought to safeguard global financial stability since the end of the Second World War.
“The global financial architecture is becoming less coherent, less institutionalized and less transparent,” said Brad Parks, executive director of AidData at William & Mary in the US.
“Beijing has created a new global system for cross-border rescue lending, but it has done so in an opaque and uncoordinated way.”
According to the FT report, rising global interest rates and the strong appreciation of the dollar have raised concerns about the ability of developing countries to repay their creditors.
The report further stated that several sovereigns have run into distress, with a lack of co-ordination among creditors blamed for prolonging some crises.
Last week, Sri Lanka’s President Ranil Wickremesinghe called on China and other creditors to reach a compromise on debt restructuring after the IMF approved a $3bn four-year lending programme for his nation.
Meanwhile, China declined to participate in multilateral debt resolution programmes even though it is a member of the IMF.
Ghana, Pakistan and other troubled debtors that owe large amounts to China are closely watching Sri Lanka’s example.
“(China’s) strictly bilateral approach has made it more difficult to co-ordinate the activities of all major emergency lenders,” said Parks.
Several of the 22 countries to which China has made rescue loans — including Argentina, Belarus, Ecuador, Egypt, Laos, Mongolia, Pakistan, Suriname, Sri Lanka, Turkey, Ukraine and Venezuela — are also recipients of IMF support.
(Inputs from Financial Times)