China hit by surge in Belt and Road bad loans, $78bn renegotiated or written off in past 3 years

[beijingwalker]

China hit by surge in Belt and Road bad loans, $78bn renegotiated or written off in past 3 years

Apr 17, 2023 09:33 AM +05:30 IST

Bad loans worth over $78 billion have hit China's $1 trillion Belt and Road Initiative (BRI) infrastructure finance programme in the past three years.

China's scheme had turned it into the top bilateral creditor, but it seems to have now become a financial burden for Beijing and its largest banks.

Chinese institutions re-negotiated or wrote off about $78.5 billion in loans for infrastructure projects such as roads, railways, ports, and airports globally between 2020 and March 2021, says the research organisation, Rhodium Group.

Rhodium recorded $17 billion in re-negotiations and write-offs in 2017-2019, which is now surpassed as companies' re-negotiated debts worth over $70 billion.

The total scale of BRI lending over the past decade is not officially known. However, AidData's Brad Parks estimates it at around $1 trillion.

Beijing has provided significant "rescue loans" to over 150 countries participating in the BRI, to prevent large borrowers from experiencing sovereign defaults.

A recent study by AidData, World Bank, Harvard Kennedy School, and Kiel Institute for the World Economy has revealed that sovereign bailouts to developing countries amounted to $104 billion between 2019 and end of 2021. For the longer timeframe between 2000 and 2021, the total stands at $240 billion.

BRI borrower countries are facing insolvency due to global growth slowdown, rising interest rates, and high debt levels. China has been accused of blocking debt restructuring negotiations by western creditors of these struggling countries.

BRI re-negotiations and write-offs reduced in 2022 after a surge in 2020-2021 due to the pandemic. Experts, however, suggest that this doesn't imply any enhancement in China's loan book's inherent quality.

The signs were visible early on, as early as 2019, but back then, no one was able to factor in the pandemic and the economic crisis in the small economies, due to the Russia-Ukraine war.

China hit by surge in Belt and Road bad loans

Global finance scheme becomes millstone for Beijing as $78bn renegotiated or written off in past 3 years

www.ft.com

 

[legacytiger18]

China hit by surge in Belt and Road bad loans, $78bn renegotiated or written off in past 3 years

Apr 17, 2023 09:33 AM +05:30 IST

Bad loans worth over $78 billion have hit China's $1 trillion Belt and Road Initiative (BRI) infrastructure finance programme in the past three years.

China's scheme had turned it into the top bilateral creditor, but it seems to have now become a financial burden for Beijing and its largest banks.

Chinese institutions re-negotiated or wrote off about $78.5 billion in loans for infrastructure projects such as roads, railways, ports, and airports globally between 2020 and March 2021, says the research organisation, Rhodium Group.

Rhodium recorded $17 billion in re-negotiations and write-offs in 2017-2019, which is now surpassed as companies' re-negotiated debts worth over $70 billion.

The total scale of BRI lending over the past decade is not officially known. However, AidData's Brad Parks estimates it at around $1 trillion.

Beijing has provided significant "rescue loans" to over 150 countries participating in the BRI, to prevent large borrowers from experiencing sovereign defaults.

A recent study by AidData, World Bank, Harvard Kennedy School, and Kiel Institute for the World Economy has revealed that sovereign bailouts to developing countries amounted to $104 billion between 2019 and end of 2021. For the longer timeframe between 2000 and 2021, the total stands at $240 billion.

BRI borrower countries are facing insolvency due to global growth slowdown, rising interest rates, and high debt levels. China has been accused of blocking debt restructuring negotiations by western creditors of these struggling countries.

BRI re-negotiations and write-offs reduced in 2022 after a surge in 2020-2021 due to the pandemic. Experts, however, suggest that this doesn't imply any enhancement in China's loan book's inherent quality.

The signs were visible early on, as early as 2019, but back then, no one was able to factor in the pandemic and the economic crisis in the small economies, due to the Russia-Ukraine war.

China hit by surge in Belt and Road bad loans

Global finance scheme becomes millstone for Beijing as $78bn renegotiated or written off in past 3 years

www.ft.com

i dont think $78 b is a lot of money, when u consider 20 years 2001-2020 , profits from other projects wud offset this small loss . west always anticipated much bigger losses

 

[beijingwalker]

https://twitter.com/x/status/1647741029070647296

 

[beijingwalker]

The Countries Bailed Out by China​

by Katharina Buchholz,
Mar 29, 2023

A new report published by the AidData research lab at Virginia’s College of William & Mary sheds some light on the usually nontransparent practice of Chinese bilateral emergency loans. The researchers that also hail from the World Bank, Harvard University and the Kiel Institute for the World Economy identified 22 countries that were bailed out by Chinese loans when they ran into liquidity problems between 2000 and 2021.

Countries that utilized these loans in an especially high number of years, i.e. rolled over their loans into subsequent years include Pakistan, Mongolia, Argentina and Sri Lanka. The latter country tapped China’s central bank for the first time in 2021 before defaulting on its debt anyways in 2022. Argentina and Mongolia were also identified by the report as countries that have been in dire financial distress since the early 2010s and were using China as a lender of last resort despite the country’s loan terms being less favorable than lower-interest bailouts offered by the IMF or the U.S. Fed. The list of Chinese bailouts also includes countries experiencing major inflation events, like aforementioned Pakistan, Turkey and Egypt.

The report finds that repeated rollovers of the Chinese loans provided by central bank liquidity swaps place them in a dubious gray area that set them apart from similar lending practices, for example liquidity swaps by the U.S. Fed. These are also often used in crises situations but must be paid back within 12 months or declared as actual debt. The Fed loans are most often used by developed nations, while developing and middle-income countries – many of them also having accumulated regular debt to China - have been increasingly turning to the Asian superpower for emergency aid. These countries have therefore been able to hold on to swap lines for expended periods of time without having to declare more external debt, but at a higher cost and at a loss of transparency in international debt.

Bailout amounts provided by China remained quite low in the 2000s and early 2010s, before shooting up from 2015 onwards, climbing to a total of $100 billion for the two decades. The two most common ways in which these loans work is through a liquidity swap with the Chinese Central Bank – where most of the outstanding balances of around $40 billion were located as of 2021 – or through credit lines from Chinese state-owned banks. Three countries, Venezuela, South Sudan and Ecuador, received prepayments on goods they were to deliver to China.

Infographic: The Countries Bailed Out by China

This chart shows countries using emergency loans from China, by number of years utilized between 2000-2021.

www.statista.com

 

[beijingwalker]

This madness of lending and bailing out got to stop, we average Chinese tax payers have to pay for those meaningless huge foreign write-offs. This is too heavy a cost to show good will to those who can turn against you at any time.

 

[beijingwalker]

China counts the cost of construction as it writes off billions of dollars​

China counts the cost of construction as it writes off billions of dollars - Marketplace

From the BBC World Service: China has written off or renegotiated $76 billion worth of borrowing in the last 18 months that had been issued as part of its huge infrastructure project. Louise Loo, senior economist at Oxford Economics, tell us what this means for China moving forward. Plus, the...

www.marketplace.org

 

[etylo]

BRI has definitely over spended itself if it has some strategic value for China in the beginning, just write off loans as gifts is just foolish by the gov, the money could be much better spend in developing poor regions of China and there are quite few.

 

[beijingwalker]

BRI has definitely over spended itself if it has some strategic value for China in the beginning, just write off loans as gifts is just foolish by the gov, the money could be much better spend in developing poor regions of China and there are quite few.

And they are never grateful, it feels like China owes them, Like China is begging them to borrow money and the money should never be paid back.

 

[beijingwalker]

China counts the cost of construction as it writes off billions of dollars​

China counts the cost of construction as it writes off billions of dollars - Marketplace

From the BBC World Service: China has written off or renegotiated $76 billion worth of borrowing in the last 18 months that had been issued as part of its huge infrastructure project. Louise Loo, senior economist at Oxford Economics, tell us what this means for China moving forward. Plus, the...

www.marketplace.org

Writing off billions of dollars debt, finally we come to know that the so called "debt trap" is to trap China.

There's a lot we Chinese need to learn about doing business and building projects in other countries, all the rules in China won't work and we have to learn to adjust fast.

 

[etylo]

And they are never grateful, it feels like China owes them, Like China is begging them to borrow money and the money should never be paid back.

Yeah, they think Chinese money are supposedly for free unlike the others like Western, worse still, they see the BRI projects as Chinese debt traps for them.

 

[FuturePAF]

This madness of lending and bailing out got to stop, we average Chinese tax payers have to pay for those meaningless huge foreign write-offs. This is too heavy a cost to show good will to those who can turn against you at any time.

These countries need a way to have consultants to help make these projects sustainable. The other option is strategic, allowing Chinese ownership of certain projects to produce for sale in other markets; connecting hydropower dams to transmission lines and allowing the Chinese producers sell to neighboring countries, with the local governments protecting these investments. But this approach will require more potential political conflicts and likely something China will seek to avoid.

China needs a system like Palantir Foundry, which will help mange these projects around the world. Many decision makers in partner nations are probably not technically trained people, such as politicians. If decisions are made with “digital advisors” in place, the chances these projects become sustainable increases. These method will also be able to continue operations when governments or officials change in each country. Almost like making the enterprises inside a digital SEZ.

This kind of software could also help local governments find where resources are being squandered and direct people to stop what is likely a form of corruption or low productivity, increases the chances inputs and outputs are being processed efficiently to earning the country revenue, so it can pay back the loan.

Use of such software could employ data scientists, sitting safely in China, with local partner data scientists in the field working with them.

Many of these countries with Chinese investment are poorly managed and highly inefficient. Helping these countries become efficient will save these investments, employ Chinese ai and data scientists, and create a market to support Chinese growth. It’s the most obvious way to save BRI and create a new engine for Chinese and partner growth; win win for China and its partners.

An app like this would also keep Chinese companies in line. It will be a form of digital regulations that all parties can reference and appeal to, whose upholding will increase Chinese soft power, making it more likely investors would invest alongside Chinese investors and share in the risk as well as the reward of current and future BRI projects.

This will raise the expectations of all developing nations as all investors, Chinese and Non-Chinese will be better able to compete and the ensuring competition will speed up development in the developing world.

This process is also how China and countries that have received BRI investments can “grow the pie” in terms of global demand for goods and services and not be cut out if western owned companies tried to pull out of China. A parallel consumer/producer market at scale will allow these counties and China to have the market size to avoid being shut out should international politics threaten as well as continue to keep innovating.

 

[S10]

I think China needs to be a lot more selective on who gets a loan, rather than giving a blank check to countries with no intention to pay.

Collaterals would be nice.

 

[khansaheeb]

This madness of lending and bailing out got to stop, we average Chinese tax payers have to pay for those meaningless huge foreign write-offs. This is too heavy a cost to show good will to those who can turn against you at any time.

Poor business judgement by China, there is a difference between helping hand and financial stupidity.

 

[beijingwalker]

Poor business judgement by China, there is a difference between helping hand and financial stupidity.

I agree, many people call BRI someone's prestige project which some Chinese leaders just try to go to other countries to 撒钱 （scatter money）trying to buy love, this is indeed very stupid. we still have poor regions like Xinjiang and Tibet to develop, the money of trillions should be rightfully spent on our own poor regions first.

 

[Catalystic]

Did the chinese govt give loans to corrupt immoral politicians of those countries ??? Any ordinary person in those countries would’ve told u NOT to give them a penny….your own fault….

Either spend/manage the project entirely yourself, or don’t get into it, or eat your losses and try to recover when it starts working.

Oh wait, that was common sense..