China’s BRI left several countries saddled with ‘hidden debts’: report



China’s Belt and Road Initiative (BRI) has left scores of lower- and middle-income countries (LMIC) saddled with “hidden debts” totalling USD 385 billion, according to new research.


The findings are part of a report published by AidData, an development research lab based at the College of William and Mary in Virginia. According to this report, China has used debt rather than aid to establish a dominant position in the development finance market.





The report has analysed more than 13,000 aid and debt-financed projects worth more than USD 843 billion across 165 countries. According to AidData, over 40 LMIC now have levels of debt exposure to China higher than 10 per cent of their national gross domestic product.


The number of “mega-projects”–financed with loans worth USD 500 million or more–approved each year tripled during the first five years of BRI implementation. Despite larger loans and expanded loan portfolios, BRI has not led to any major changes in the sectoral or geographical composition of China’s overseas development finance program, the report said.


As per the report, 35 per cent of the BRI infrastructure project portfolio has encountered major implementation problems, such as corruption scandals, labour violations, environmental hazards, and public protests. By comparison, only 21 per cent of the Chinese government’s infrastructure project portfolio outside of the BRI has encountered similar implementation problems, according to AidData.


Since its launch in 2013, the BRI has been well received across the globe due to its easy loan parameters. However, these concessions facilitated economic and military expansion for the Chinese, allowing them to build infrastructure, establish military bases in BRI- recipient countries, reported The Times of Israel.


A large number of these sovereign loans are in fact extended to developing countries and are negotiated in secret. A few of these loans use resources as collateral. This dept trap diplomacy, the lack of transparency and unreasonable loan conditions have made these schemes extremely unpopular and as a result, have earned the BRI a lot of bad press.


Unsustainable loans and cases of debt traps in countries like Sri Lanka and Malaysia as well as the use of sovereign land for building China’s military installations have made the BRI a cause for concern.


The latest report reveals new insights about the BRI, and it comes at a time when the U.S. government and its allies are seeking to develop a viable alternative to the BRI, under the auspices of the Build Back Better World (B3W) initiative that the G7 announced in June 2021.


In a bid to compete with BRI, even the European Union recently launched the Global Gateway, a new infrastructure development scheme.

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

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