Smaller countries under Chinese debt burden of $385 billion, accuses US think tank

Washington/Beijing: – A US think tank has accused Chinese President Xi Jinping’s ambitious Belt and Road Initiative (BRI) of creating a debt burden on small countries as much as USD 385 billion. The study notes that about 42 countries are trapped in the Chinese predatory economic policies, with their debt exceeding 10% of the GDP. The report said that corruption and other malpractices had been reported in more than 30% of BRI projects, and their opposition has also increased.

The study group AidData, part of the US College of William and Mary, has published a detailed report on BRI. The report is titled ‘Banking on the Belt and Road’. The report lists more than 13,000 Chinese projects worldwide and the 843 billion invested in them. More than 300 state-owned companies and banks in China are involved in the projects, which are being implemented in 165 countries, according to the AidData report.

Although China has increased its investment in foreign projects over the past few years, subsidized financing has been negligible, and the number of commercially funded projects has been high. According to AidData, China has provided grants to only one out of 31 projects. China is the world’s largest lender, surpassing the combined loans given by the United States, European and other financial institutions. China’s interest rates are higher than others, and its repayment period is shorter.

According to a report by the US think tank, China is charging more than 4% interest on loans with a repayment period of 10 years and less. It has been pointed out that the European countries and other financial institutions are charging one to one and a half per cent interest and the repayment period is more than 25 years. Chinese banks are not dealing directly with the concerned governments but are financing government companies, private companies, joint ventures and special purpose vehicles. However, all these have to be guaranteed by the government. Other things have been taken as collateral security in 40 of the 50 projects that have received the highest amounts of loans. Most of these are government-owned.

Since the loans given by China are not given directly to the government, it is not mentioned in the list of loans to the government. Such loans are referred to as “hidden debts” by the US think tank. Cases of such hidden debts have been reported in many countries, amounting to a whopping USD 385 billion. Such examples have emerged in more than 40 low-income countries, with Chinese debt accounting for more than 10% of their GDP.

Chinese President Xi Jinping announced the ambitious Belt and Road Initiative last decade. Under this plan, China undertook projects on a large scale in Africa, Asia, Latin America and European countries. However, opposition to China’s BRI has been growing over the past few years, and the long-term implementation of this ambitious plan will pose a major challenge to China, claims the think tank AidData. Over the past year, the United States and Europe have come up with initiatives to challenge BRI. The US think tank also warned that it would be difficult for China to compete with these initiatives.