BRI: Poor countries have hundreds of billions of debts with China (INFOGRAPHIC)
According to AidData, China grants US$ 85 billion a year in aid and loans, charging higher interests than the West. The debt of 42 nations to Beijing is more than 10 per cent of their GDP. BRI partners are unlikely to look at the alternatives offered by the US and the EU.
Beijing (AsiaNews) – Middle- and low-income countries have debts with China worth hundreds of billions of dollars, this according to a study released today by AidData, a research and innovation lab located at the College of William & Mary, in the United States.
Its report looks at China’s foreign funding, including the Belt and Road Initiative (BRI), the global infrastructure plan launched in 2013 by Chinese President Xi Jinping to boost the country's trade and geopolitical role.
The study looked at 13,427 projects undertaken between 2000 to 2017 in 165 countries with the support of Chinese loans and aid, worth a total of US$ 843 billion.
At least 300 government institutions and state-owned entities funded these projects, turning China into the largest lender of many developing nations.
The picture that emerges is opaque, covered in many parts by a veil of secrecy, a factor that has prevented several poor countries from weighing the costs and benefits of joining the BRI.
If, before the launch of the new Silk Roads, China and the United States spent similar amounts on foreign aid and international loans, a gap developed since 2013.
Since then, Beijing invested about US$ 85 billion a year in foreign development projects compared to US$ 37 billion for Washington.
Most of the funding are in the form of loans rather than aid, to the tune a 30 to 1 radio. By comparison, the European Union provides US$ 58.3 billion a year, making it the biggest international donor to poor countries.
For many observers, China’s BRI partners are now caught in a "debt trap", at risk of having to sell the country’s assets to China, especially infrastructure such as ports, should they fail to pay the interests or default on their loans.
According to AidData, 40 of the 50 largest loans granted by Chinese state creditors include "collateral" guarantees from client governments.
What is more, Chinese aid is more expensive than that offered by Western countries. On average, Beijing's loans come with an interest rate of 4.2 per cent and are repayable in less than 10 years; those by Germany, Japan and France have a rate of 1.1 per cent, and a repayment period of 28 years.
The AidData report points out the debt of 42 countries to China is more than 10 per cent of their GDP. In the case of Laos, its sovereign debt exposure is at 29.4 per cent of GDP, the highest in the world; followed by Sri Lanka, Kenya, Ethiopia, Venezuela, Djibouti, Maldives, Cambodia, Mongolia, Senegal, and Belarus.
In addition to the "official" debt owed to the Chinese, there is a "hidden” debt; i.e., loans unreported by China and the governments concerned to the World Bank's Debtor Reporting System. This debt is estimated to be around US$ 350 billion. Laos’s hidden debt exposure stands at 35.4 per cent of its GDP.
AidData also notes that 35 per cent of BRI projects have faced major issues, such as corruption, labour law violations, environmental problems and public protests.
In view of China’s strategy, the United States and the European Union have recently launched their own alternatives to the BRI: the US’s Build Back Better World (B3W) and the EU’s Global Gateway Initiative (GGI).
These moves are meant to focus on "sustainability”, meeting certain financial, environmental and labour standards whose absence is at the basis of Western criticism of China’s new Silk Roads.
The US/EU response is designed to counter China’s global challenge. However, it won’t be easy for Americans and Europeans to delink China and its debtors whose relationship has been built up over a long period of time.
As experts explained to AsiaNews, many developing countries favour Chinese loans and projects because Beijing does not impose fiscal and financial conditions, environmental and humanitarian constraints, or complex management and transparency controls on them.