2/2/2024 0 Comments China debt defaults"The reality is that like bondholders, which hold the majority of Africa's debt, Chinese banks lent to countries that looked quite promising. "The debt-trap idea is that Chinese banks had ulterior motives: deliberately lending to countries when they knew those countries couldn't repay," Brautigam said. allegation against China "is simply untenable," Chinese Foreign Minister Wang Yi said this month.Ĭhinese state media constantly run articles aiming to debunk the narrative.Ī number of economists and researchers are also saying the debt-trap narrative against China is unfounded. The debt trap allegations have infuriated Beijing, which says Western private lenders are responsible for the bulk of poor countries' debt and charge much higher interest rates. have regularly warned developing countries, particularly in Africa, about the dangers of Chinese loans, and a 2020 State Department document, titled "The Elements of the China Challenge," referred to China's "predatory development program and debt-trap diplomacy."Ĭhina Spotlighted in Kenya’s Presidential Race ![]() "The bigger loans are likelier to be restructured, if repayment problems loom, as we saw in Zambia," Hameiri wrote in an email to VOA. Shahar Hameiri, a political economist from the University of Queensland in Australia, agreed that the latest move by Beijing in forgiving African nations' interest-free loans was probably just "a goodwill gesture." ![]() The move stopped construction of infrastructure projects largely funded by a Chinese bank, the South China Morning Post reported. In July, Zambia's finance ministry announced it was canceling $2 billion of undisbursed loans from its external creditors, $1.6 billion of which are from Chinese banks. Lusaka owes some $6 billion to Chinese entities. Zambia Debt Relief Pledge Clears Way for $1.4 Billion, IMF SaysĬhina is Zambia's biggest creditor. The move, welcomed by the International Monetary Fund, is ongoing. China, along with France, is chairing a committee to deal with debt relief efforts. Verhoeven said the sums of money involved in the 23 loans forgiven would likely be modest, but the politics of such gestures are noteworthy because "for many years the Chinese would kind of shrug at various aspects, various lines of criticism, pertaining to their engagement in different African countries." But with the debt-trap allegations, "China has belatedly woken up to the fact that this is a bit of a PR nightmare," said Verhoeven.Ĭhina has also been playing a role in restructuring the external debt of some African countries such as Zambia, which became the first African country to default on its debt during the pandemic. While this applies to the Chinese government's interest-free loans, it is not the case with the country's interest-bearing commercial loans, which can be restructured but are never considered for cancellation, analysts explained. "This is not a loan cancellation per se, but the cancellation of the remaining unpaid portion of interest-free loans that have reached maturity, that is if a loan was supposed to be fully paid off over 20 years, but it still has an outstanding balance, they cancel that outstanding balance," Deborah Brautigam, director of the China Africa Research Initiative at Johns Hopkins University's School of Advanced International Studies, told VOA.īrautigam's research shows that between 20, China canceled at least $3.4 billion of such debt in Africa. ![]() ![]() China has been playing a role in restructuring the external debt of some African countries such as Zambia.Ĭhina's announcement did not specify the countries or the amount of loan forgiveness, but analysts say that since 2000, China has regularly forgiven loans that are nearing their end but have a small balance. FILE - Zambia's then- President Edgar Lungu, left, meets and greets Chinese workers from Aviation Industry Corporation of China in Lusaka, Zambia, Sept.
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