As part of its “New Silk Road” initiative, more and more loans granted by Beijing can no longer be serviced. Since 2013, China has been spending around 840 billion U.S. dollars on building roads, ports, dams and power plants worldwide.
With this “project of the century,” as China’s ruler Xi Jinping has called it, Beijing is pursuing political goals, not purely economic ones. Many loans were therefore granted not according to such criteria but according to political ones.
Even without such a distortion of investment conditions, Beijing’s program is more than courageous, given the risks. Therefore, the question arises of whether China has not overreached itself to this global initiative.
118 billion is on the line for Beijing right now
The Financial Times reports that more countries have to ask Beijing to restructure their loans because they can no longer serve them. In Asia, Africa and Latin America, economies have been set back for years by the covid malaise.
That is likely another reason why loans worth around $52 billion had to be renegotiated in 2020 and 2021, compared with $16 billion in 2019.
According to a study by the New York-based research institute Rhodium, 118 billion, 16 per cent of the total credit volume, is currently on the line.