New Delhi: China leads the United States and other major powers by at least 2:1 in its Belt and Road Initiative (BRI), with annual international development finance commitments of about $85 billion a year.
According to a study by Eddata, China is doing so with semi-concessional and non-concessional loans instead of aid.
Offering a uniquely comprehensive and nuanced dataset of international development finance from China, the study covers 13,427 projects worth $843 billion in 165 countries in every major world region over an 18-year period.
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“Since the start of the Belt and Road Initiative (BRI), China has maintained a 31-to-1 ratio of loans to grants and a 9-to-1 ratio of OOF to ODA,” the study said.
China’s state-owned commercial banks played an important role during the BRI era by organizing lending syndicates and other co-financing arrangements, which made it possible to undertake big-ticket infrastructure projects, the study said. Is.
The number of “mega-projects” – with loans of $500 million or more – being approved tripled every year during the first five years of BRI implementation,” the study said.
The study, titled “Banking on the Belt and Road: Insights from a New Global Dataset of 13,427 Chinese Development Projects”, said rising levels of credit risk have created pressure for stronger repayment safeguards.
The study found that 35% of the BRI infrastructure project portfolio has faced major implementation problems such as corruption scandals, labor violations, environmental hazards and public protests, but the Chinese government’s infrastructure project portfolio outside the BRI sees little implementation. problems have been encountered.
“We also find that BRI infrastructure projects are less likely to face problems during implementation when they are carried out by organizations in the host country (or organizations that are neither from China nor from China,” the study said. are from the host countries).”
The study noted that although the implementation of the BRI did not lead to any major changes in the regional or geographic structure of the country’s foreign development finance programme, it marked a significant change in how China controls infrastructure projects.
“Most of its foreign loans during the pre-BRI era were directed to sovereign borrowers (i.e., central government institutions), but about 70% are now state-owned companies, state-owned banks, special purpose vehicles, joint ventures. has been directed to. , and private sector institutions,” the study said.
“These loans, for the most part, do not appear on government balance sheets in LMICs. However, most of them benefit from explicit or implicit forms of host government liability protection, which has blurred the distinction between private and public debt and introduced major public financial management challenges for LMICs,” the study said. has gone.
The study shows that the Chinese debt burden is much larger than that of research institutions, credit rating agencies, or intergovernmental organizations with previously understood monitoring responsibilities.
“42 LMICs now have China’s credit exposure levels of more than 10% of GDP. These loans are systematically underreported to the World Bank’s Debtors Reporting System (DRS) because, in many cases, central government institutions in LMICs are not the primary borrowers responsible for repayment,” the study said.
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“We estimate that the average LMIC government is reducing its actual and potential repayment obligations to China by an amount that equals 5.8% of its GDP. Collectively, these underreported loans are worth approximately $385 billion. is,” the study said.
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