China in chilling warning to Taiwan over invasion
As of 2020, China claimed to have provided $170billion (£125billion) worth of loans to low and middle-income countries. Chinese loans have long drawn criticism for their lack of transparency, with Beijing being accused of using funds to gain diplomatic or economic concessions over recipient countries. As tensions over Taiwan reach boiling point, Express.co.uk takes a look at the countries most indebted to China around the world.
China officially lent $170billion (£125billion) to the world’s poorest countries as of 2020, up from just $40billion (£26billion) in 2010, according to the World Bank.
However, according to development finance researchers AidData, the true figure may be twice as high.
They found up to half of China’s lending to developing countries was kept off government balance sheets by funnelling money through state-owned or private institutions and companies.
As a result of this unofficial debt, AidData claims there are now more than 40 low and middle-income countries whose debt exposure to China is greater than 10 percent of their annual economic output.
A handful of countries owe more than 30 percent of their national income in debt to China
The countries most indebted to China are mostly in Africa, South America and central Asia
By the end of 2020, according to the World Bank, the countries most indebted to Chinese lenders were Pakistan with $77.3 billion (£60.4billion) worth of external debt, Angola with $36.3billion (£28billion), Ethiopia with $7.9billion (£6billion), Kenya with $7.4billion (£5.8billion) and Sri Lanka with $6.8billion (£5.3billion).
Many of these countries have received financing as part of China’s New Silk Road initiative – a massive $900billion (£700billion) programme of port, rail and land infrastructure construction spanning Eurasia and Africa.
In relative terms, the country with the highest debt burden to China as a percentage of gross national income – a measure of economic output that includes income from abroad – was Djibouti, at 43 percent.
The East-African nation is followed by Angola (41 percent), the Maldives (38 percent), Laos (30 percent) and the Democratic Republic of the Congo (29 percent).
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Indeed, many of the countries most heavily indebted to China are in Africa, where the economic impacts of the pandemic and shortages of fuel and food following Russia’s invasion of Ukraine have increased rates of extreme poverty.
According to the World Bank, China is currently the world’s number one lender to the world’s poorest countries, responsible for 40 percent of the £30billion in debt-service payments they owe this year.
Chinese loans tend to have higher interest rates and shorter repayment windows than those from international institutions like the International Monetary Fund or The World Bank.
The setup of loans from China is closer to that of commercial loans, notably in their repayment terms and the specificity of the infrastructure projects to which they are destined, according to Chatham House.
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Chinese firms built an electrified railway between Ethiopia and Djibouti
The UK think tank goes on to note that the lack of transparency over the terms agreed to by African governments has led to fierce domestic backlash and and accusations from abroad that China is engaging in debt-trap diplomacy.
This entails pushing developing countries into accepting loans they cannot afford to build infrastructure projects that Beijing may seize or threaten to seize should they default – extending their economic, military or geopolitical reach as a result.
Often-cited examples include a Sri Lankan port built with Chinese funds that China ultimately seized a 70 percent stake in, the same fate befalling a railway in Laos.
The pandemic made the repayment of Chinese loans even more difficult, the Financial Times reporting the country was forced to renegotiate loans worth $52billion (£40billion) in 2020 and 2021, more than three times as much as during the previous two years.
But many nations have in fact benefited enormously from investments in infrastructure that would scarcely have been possible without Chinese lenders.
In Africa alone, Chinese firms have helped build and upgrade over 10,000km of railway, roughly 100,000km of roads, 1,000 bridges and 100 ports.
Chinese lending to Africa may actually have peaked according to Chatham House, as lending fell from a high of $29.5billion (£22billion) in 2016 to just $7.6billion (£5.6billion) in 2019.
Beijing’s funding methods are also evolving, as evidenced by the Nairobi expressway in Kenya constructed under a $600 million Build-Operate-Transfer model that will see the government take ownership of the line after 30 years.
The map of east Asia shows just how close China and Taiwan are
However, according to China’s Foreign Aid and Investment Diplomacy, Volume II, Beijing has been awarding financial help in order to further President Xi Jinping’s strategic goal of reunifying Taiwan with the mainland.
The paper claims China compelled many developing countries to cut diplomatic ties with Taipei in order to isolate the state from the international community and diminish its status as an independent country.
Tensions between the two reached an all-time high last month following a formal visit from Speaker of the US House of Representatives Nancy Pelosi, which Beijing condemned as “extremely dangerous”.
In response, China held its largest-ever military exercises in the air and sea around the island of Taiwan, which reportedly included the firing of ballistic missiles.