It was revealed that China spent 1 trillion dollars (approximately 1,308.4 trillion won) in the form of loans to developing countries to build infrastructure for the One Belt, One Road project. There are concerns about the backlash that high interest rate ‘China money’ will bring.
According to AFP and the New York Times (NYT) on the 7th (local time), during the first 10 years of China’s Belt and Road Project, China gave about 1 in 100 percent to developing countries in the name of funds for the construction of power plants, roads, airports, communication networks and other infrastructure. trillion dollars was paid.
A report released the day before by AidData, a research institute that tracks development finance at the College of William and Mary in Virginia, explained that more than half of the $1 trillion in loans have now entered the principal repayment period. It is expected that 75% of loans will reach the principal repayment period by 2030.
“China, which is pursuing 21,000 projects across 165 countries, has currently pledged approximately $80 billion in annual aid and loans to low- and middle-income countries,” Aid Data said in the report.
“China is playing an unfamiliar and uncomfortable role as the world’s largest debt collector,” he said. “Excluding interest, the outstanding debt owed to China by borrowers in developing countries is at least $1.1 trillion (approximately 1,439.13 trillion won).” “It amounts to,” he added.
Experts say that China has brought economic growth to the Global South (developing countries in the Southern Hemisphere) by promoting the One Belt, One Road project and has established a role comparable to that of the United States and the World Bank in global development.
But behind this positive impact, there are low-income countries struggling with unsustainable levels of debt.
Instead of lending investment funds to build ports or roads in developing countries such as Africa, China receives the right to use ports or roads if the countries do not repay their debt. Sri Lanka borrowed money from China to build the Hambantota deep-water port, but ended up handing the port over to China after using its financial income to pay off debt.
The NYT pointed out that “China ordered its own companies to contract, and in some cases built expensive, substandard projects that did not promote economic growth,” and AFP also said, “Critics say the costs of projects promoted by Chinese companies are high. “We have been pointing out for a long time that it is unclear,” he said.
In particular, China has been criticized for demanding strict confidentiality about the size and conditions of the loan, preventing other major countries from providing support. This effectively blocks access from international lending institutions such as the International Monetary Fund (IMF) and WB.
In addition, there were reports that China attempted to provide additional loans to these countries, saying it would help them repay money borrowed from the IMF. It is known that developing countries experiencing economic difficulties after COVID-19 are facing the possibility of default on their debt.
Accordingly, Western countries have also criticized China for engaging in ‘debt trap diplomacy’ in the name of the One Belt, One Road.
Previously, U.S. President Joe Biden urged the IMF and WB to promote measures to increase their lending capacity at the G20 summit last September. This is to solve the problem that developing countries have fallen into a ‘debt trap’ by using China money, which is relatively easy to borrow but has high interest rates.
Meanwhile, Chinese President Xi Jinping announced at the Belt and Road Forum held in Beijing last month that China would invest more than $100 billion (about 131 trillion won) in new funds into the Belt and Road project.
Source: Donga
Mark Jones is a world traveler and journalist for News Rebeat. With a curious mind and a love of adventure, Mark brings a unique perspective to the latest global events and provides in-depth and thought-provoking coverage of the world at large.