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Belt And Road Bailouts Are Soaring As Partners Struggle

  • Between 2015 and 2021, China increased emergency liquidity swaps to several Belt and Road countries, with some receiving medium-term loans of at least $1 billion for balance-of-payment support.
  • Mongolia's external debt to China was at 24% of its GNI in 2021, and 60% of China's overseas lending in 2022 supported nations in financial distress, up from 5% in 2010.
  • China's development loans carry stricter terms compared to other international sources, including higher interest rates and shorter repayment durations.
Yuan

As China's Belt and Road Initiative enters its second decade, the country has been celebrating with much pomp and many global leaders in attendance.

But, as Statista's Katharina Buchholz details below, China's high-level infrastructure and international development program has not been free of controversy

The Kiel Institute for the World Economy has identified a major rise in emergency loans to countries having difficulty repaying debt taken on as part of Belt and Road projects.

Additionally, China's loan conditions and transparency practices are being criticized by the researchers.

You will find more infographics at Statista

Between 2015 and 2021, China extended substantial emergency lines of liquidity swaps to Belt and Road countries like Mongolia, Egypt, Pakistan, Sri Lanka and Turkey, many of them being rolled over and often increased for several years in a row. Oman, Angola and Venezuela as well as some of the countries mentioned above also received medium-term loans of at least $1 billion each as balance-of-payment support in that time frame.

Mongolia's high debt to China became a problem when the mineral-rich country fell on hard times after the 2000s commodities boom fizzled out. In 2021, its external debt to China still stood at 24 percent of gross national income, one of the highest ratios in the world. Both big Belt and Road borrowers, Pakistan and Egypt had to accept large-scale bailouts from China while their economies have been flailing. The share of China's borrowers in distress has increased so steeply in recent years that 60 percent of the country's overseas lending portfolio supported these countries in 2022, up from just 5 percent in 2010.

In 2015, bailouts from China shot up to almost $30 billion, from just around $11 billion the year before, as China upped its emergency loans to distressed Argentina by more than $8 billion. The country only joined Belt and Road in 2022 but did borrow from Beijing before that. The same year, China also provided $10 billion as a balance-of-payment support to Venezuela.

While going into debt to finance large-scale infrastructure projects is not unusual for countries around the world, China's development loans have less favorable conditions than those of other available sources, for example the International Monetary Fund, the World Bank or Paris Club countries. This includes higher interest rates and shorter repayment windows, which can become a problem especially for poorer countries. The same is true for Chinese bailout loans, which the IFW Kiel found to typically carry an interest of 5 percent as opposed to the 2 percent rate the IMF charges.

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  • Mamdouh Salameh on October 31 2023 said:
    Like all great visionary initiatives, China’s Belt and Road Initiative (BRI) has had its share of criticisms of how some recipients of Chinese loans are now struggling with their overall debt. But these criticisms are overwhelmingly eclipsed by the great numbers of recipients who benefited greatly.

    And to its great credit, China has been extending substantial emergency lines of liquidity swaps and large-scale bailouts to BRI borrowing countries facing difficulties with their loans, many of them being rolled over and often increased for several years in a row.

    Western countries are quick to criticize China but have any of them ever offered the poor and developing countries of the world any such generosity and support as China has been doing since the launch of its BRI ten years ago?

    Dr Mamdouh G Salameh
    International Oil Economist
    Global Energy Expert

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