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Instead of lending money for highways and bridges, China has shifted to providing emergency rescues for previous borrowers.
Reporting from Beijing and Guangzhou, China
After lending $1.3 trillion to developing countries, mainly for big-ticket infrastructure projects, China has shifted its focus to bailing out many of those same countries from piles of debt.
The initial loans were mostly part of the Belt and Road Initiative, which Xi Jinping, China’s top leader, started in 2013 to build stronger transportation, communications and political links in more than 150 countries.
But now the two main Chinese state banks that provided most of the infrastructure loans have reduced their new lending. Rescue loans climbed to 58 percent of China’s lending to low- and middle-income countries in 2021 from 5 percent in 2013, according to a new report from AidData, a research institute at William and Mary, a university in Williamsburg, Va., that compiles comprehensive information about Chinese development financing.
“Beijing is navigating an unfamiliar and uncomfortable role — as the world’s largest official debt collector,” the institute wrote.
While the Belt and Road Initiative bought geopolitical clout for Beijing and helped finance economically useful projects, Chinese loans were also used to build expensive projects that have not spurred economic growth and have loaded countries with debt they are now unable to repay.
Much of the recent lending by Beijing consists of loans from China’s central bank to the central banks of countries that took out Belt and Road Initiative loans. Another large and growing chunk is from state-controlled Chinese commercial banks, working in conjunction with groups of Western banks.
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