China’s Belt and Road Initiative project represents a massive injection of funds to the most struggling nations, while raising concerns about the way the country finances and manages its projects.
According to a report by AidData, a research center at the College of William and Mary, 42 low and middle-income countries have debt exposure to China exceeding 10 percent of their annual gross domestic product, per the Wall Street Journal.
The report identifies a whopping $385 billion in Chinese loans as not included in the nations’ official borrowing – nearly half of China’s overseas lending for construction of roads, railways and powerplants.
This secret debt has become exceedingly more common because lenders fund activity through special-purpose corporations instead of host governments.
Additionally, 35 percent of China’s overseas infrastructure projects have faced problems like corruption scandals, labor violations, environmental hazards and public outcry. Nearly 400 projects valued at $8.3 billion are linked to China’s military, according to the report.
The report dives into $843 billion in Chinese loans for 13,427 projects between 2000 and 2017. In analyzing the findings, AidData said Beijing has pursued three main goals: turning the enormous haul of money earned by the nation’s exporters into foreign loans, keeping domestic construction and industrial sectors busy by pursuing foreign building projects; and securing oil and grain to plug domestic shortfalls.
“The developing world is helping fix China’s problems.” AidData executive director Brad Parks said.
Thanks to the pandemic, this month Chinese lenders agreed to cancel debt payments owed by 19 African countries. Approximately 49 percent of Chinese lending during the period researched by AidData has been earmarked for Africa.