The decision concerns the cancellation of 23 interest-free loans on 17 African countries whose repayment was delayed in 2021, and China did not clarify the size of the debts that will be written off, nor the names of the countries involved in the decision.
It is noteworthy that Beijing has become one of the world’s major creditors. Since 2010, the Chinese government has tripled its loans, mainly helping underdeveloped or developing countries through the “Belt and Road” initiative, a platform for international cooperation in infrastructure, trade, investment and finance to connect China with other parts of the world. Asia, the Middle East, Europe and Africa, to become a direct and explicit competitor to organizations such as the International Monetary Fund and the World Bank.
However, Beijing tends to lend at higher interest rates and shorter repayment periods, and it also uses loans as leverage in exchange for a country’s natural resources, or for certain geopolitical interests.
Beijing asserts that there has been no case for any country in debt to China, and it has fallen into the so-called “debt trap”, that is, lending money to other countries with the aim of controlling their main assets if the latter is unable to pay the debts.
It is worth noting that about 60 percent of China’s external lending goes to countries currently facing severe debt crises, according to World Bank researchers.
The economic crisis caused by the Ukraine crisis, in turn, caused an influx of foreign currency from developing countries that are part of the Silk Road Initiative, increasing the risk of debt default.
Perhaps the most prominent of these cases is Pakistan, where Chinese investments amount to 62 billion dollars, nearly one-fifth of the gross domestic product of Islamabad and Sri Lanka, a country in chaos after its default, and China has committed to it more than 32 billion dollars.
And official data issued by the National Foreign Exchange Authority of China showed that the country recorded 7102.2 trillion US dollars of foreign debt in local and foreign currencies at the end of March 2022, down 1 percent from the end of 2021.
And the new China News Agency (Xinhua) quoted the authority as saying that the outstanding foreign debt in local currency represents 45 percent of the total, which is the same as it was at the end of 2021.
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