China has spent €220 billion in loans to developing countries since 2008, new study reports

Chinese money in many countires/Shutterstock Images

China spent €220 billion helping 22 developing countries in debt distress between the financial crisis, 2008, and 2021, reports from former staff at the World Bank have revealed.

Nearly 80% of this amount was made in the five years between 2016 and 2021, and mainly in loans to middle-income countries including Argentina, Mongolia, Sri Lanka, Egypt and Pakistan, according to the report by researchers from the World Bank, Harvard Kennedy School, AidData and the Kiel Institute for the World Economy.

China has lent billions of dollars to build infrastructure in developing countries, but this lending has decreased since 2016 as many projects have failed to pay back the expected financial dividends.

“Beijing is ultimately trying to rescue its own banks. That’s why it has gotten into the risky business of international bailout lending,” said Carmen Reinhart, a former World Bank chief economist and one of the study’s authors.

Chinese rescue loans to countries in debt discomfort climbed from less than 5% of its international lending portfolio in 2010 to 60% in 2022, the study found.

China’s rescue lending is “opaque and uncoordinated,” said Brad Parks, one of the report’s authors.

China’s government hit back at the criticism, saying its overseas investments operated on “the principle of openness and transparency”.

“China acts in accordance with market laws and international rules, respects the will of relevant countries, has never forced any party to borrow money, has never forced any country to pay, will not attach any political conditions to loan agreements, and does not seek any political self-interest,” foreign ministry spokesperson Mao Ning said at a news conference on Tuesday.

China is negotiating the restructuring of debts with countries including Zambia, Ghana and Sri Lanka and has been criticised for holding up the processes.

China has also called on the World Bank and International Monetary Fund to also offer debt relief.

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