November 14, 2022
1 min read

Huge loans that countries owe to China may never get repaid

More importantly, more than half the world’s poor countries owe more to China than to all Western governments combined….reports Asian Lite News

Though China today finds itself holding significant sway over the financial futures of many developing nations, the vast sums of money that countries owe to Beijing may never get repaid.

Writing for the InsideOver publication, columnist Federico Giuliani, said that three-fifths of the world’s developing countries are now having considerable trouble repaying loans or have already fallen behind on their debts.

More importantly, more than half the world’s poor countries owe more to China than to all Western governments combined.

Giuliani said China became the lender of choice for many nations by generously donating money to governments for various infrastructure projects like hydroelectric dams, airports and highways.

For countries like Pakistan, Suriname and Kenya, public debt has increased many fold.

“Debt is one part of the challenge; the nature of Chinese loans is another. China issues far more of its loans at adjustable interest rates than Western governments or multilateral institutions. However, with global interest rates rising swiftly, debt payments are soaring when nations can least afford to pay,” writes Giuliani.

He further argues that China thus has made inroads into several countries, but the negative outcome of such ingress is there for all to see in myriad ways.

“Societies impacted by Chinese labour and materials realise that money comes, but with a catch. Jobs are promised but given only to Chinese people. Profits are there for grabs but only for Chinese companies,” he adds.

Further, Chinese security firms operate with much greater latitude in parts of Africa and have become states in themselves, making it far more difficult for countries to protect their sovereignty.

“As we go along, one can visualise problems for China as they will face a reducing return on debt and while they will continue to pull some strings, it may not be as easy as they may think,” writes Giuliani.

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