BEIJING: In much of the developing world, China finds itself in an uncomfortable position as the world’s debt collector amid rising inflation and a weakening global economy.
Over the past decade, Beijing has been the lender of choice for many countries. It funded governments to build bullet trains, hydroelectric dams, airports and superhighways. However, as inflation rose and economies weakened, China found itself in a precarious position.
Keetho bradsherWriting in the Sydney Morning Herald (SMH), China has had a significant impact on the financial futures of many countries and has owed large sums of money that may never be fully repaid, allowing its officials to help borrowers in poorer countries. may be compelled to act.
When Suriname could not pay its debts, a Chinese State Bank confiscated money from one of the accounts in the South American country. The SMH report said that when Kenyans and Angolans went to the polls in the presidential election in August, the countries’ Chinese debts and how to repay them was a hot-button political issue.
The economic crisis in poor countries is evident given the impact of the pandemic coupled with high food and energy prices following Russia’s invasion of Ukraine. Many people took huge loans from China.
In Pakistan, the overall public debt has more than doubled in the past decade, with debt from China growing the fastest; In KenyaThe public debt is nine times and in Suriname ten times, it said.
The nature of China’s debt is adding to the challenges. China issues far more loans to poor countries at adjustable interest rates than Western governments or multilateral institutions. With global interest rates rising sharply, debt payments are on the rise when these countries cannot afford to pay the least.
A bureaucratic war between powerful government ministries in Beijing has already stalled any easy solution to the debt problem and threatened to delay it further. According to the SMH report, a new slate of ministers will take office in March, possibly restarting the process of resolving debt issues.
In particular, China and the United States have favored different approaches to debt problems. In the past, Beijing has attempted to lend more money to some countries, including Argentina, Ecuador and Pakistan, so that they can continue to make payments on existing loans. China’s approach helps these countries import food and fuel, but leaves them with even more debt.
The United States prioritizes requiring government agencies and banks to forgive a portion of their loans. This was done during the Latin American debt crisis in the 1980s, so that borrowers could afford to pay interest on the remaining loans.
But this approach requires banks to immediately acknowledge the huge losses, a hard sell in China given its economic slowdown and housing crisis. Bradsher said weak home prices and stalled real estate transactions have already left Chinese banks with bad loans for developers and homebuyers.
Those terms also mean that Chinese banks are reluctant to lend more to countries under China’s policy framework for developing countries, the Belt and Road Initiative.
According to the IMF, three-fifths of the world’s developing countries now have a lot of trouble paying off debt or are already lagging behind in their debt. More than half of the world’s poor countries owe more to China than all Western governments combined.
Over the past decade, Beijing has been the lender of choice for many countries. It funded governments to build bullet trains, hydroelectric dams, airports and superhighways. However, as inflation rose and economies weakened, China found itself in a precarious position.
Keetho bradsherWriting in the Sydney Morning Herald (SMH), China has had a significant impact on the financial futures of many countries and has owed large sums of money that may never be fully repaid, allowing its officials to help borrowers in poorer countries. may be compelled to act.
When Suriname could not pay its debts, a Chinese State Bank confiscated money from one of the accounts in the South American country. The SMH report said that when Kenyans and Angolans went to the polls in the presidential election in August, the countries’ Chinese debts and how to repay them was a hot-button political issue.
The economic crisis in poor countries is evident given the impact of the pandemic coupled with high food and energy prices following Russia’s invasion of Ukraine. Many people took huge loans from China.
In Pakistan, the overall public debt has more than doubled in the past decade, with debt from China growing the fastest; In KenyaThe public debt is nine times and in Suriname ten times, it said.
The nature of China’s debt is adding to the challenges. China issues far more loans to poor countries at adjustable interest rates than Western governments or multilateral institutions. With global interest rates rising sharply, debt payments are on the rise when these countries cannot afford to pay the least.
A bureaucratic war between powerful government ministries in Beijing has already stalled any easy solution to the debt problem and threatened to delay it further. According to the SMH report, a new slate of ministers will take office in March, possibly restarting the process of resolving debt issues.
In particular, China and the United States have favored different approaches to debt problems. In the past, Beijing has attempted to lend more money to some countries, including Argentina, Ecuador and Pakistan, so that they can continue to make payments on existing loans. China’s approach helps these countries import food and fuel, but leaves them with even more debt.
The United States prioritizes requiring government agencies and banks to forgive a portion of their loans. This was done during the Latin American debt crisis in the 1980s, so that borrowers could afford to pay interest on the remaining loans.
But this approach requires banks to immediately acknowledge the huge losses, a hard sell in China given its economic slowdown and housing crisis. Bradsher said weak home prices and stalled real estate transactions have already left Chinese banks with bad loans for developers and homebuyers.
Those terms also mean that Chinese banks are reluctant to lend more to countries under China’s policy framework for developing countries, the Belt and Road Initiative.
According to the IMF, three-fifths of the world’s developing countries now have a lot of trouble paying off debt or are already lagging behind in their debt. More than half of the world’s poor countries owe more to China than all Western governments combined.