There Is $385 Billion in ‘Hidden Debt’ From China’s Belt and Road Initiative, Study Finds

Source: https://www.barrons.com/articles/chinas-belt-and-road-initiative-hidden-debt-51632922403

There is some $385 billion in “hidden debt” across lower- and middle-income countries from China’s sweeping global infrastructure development initiative, a study has found.

Lending linked to the Belt and Road Initiative (BRI), one of President Xi Jinping’s trademark foreign policy projects, has been systematically underreported for years, research published by AidData showed Wednesday. AidData is an international development research laboratory based at The College of William & Mary, in Virginia.

The BRI, launched in 2013, is a Chinese strategy to finance transport, energy, telecommunications, and urban development projects across the world. The initiative covers the likes of hydro power in Pakistan, railways in Nigeria, and Israel’s largest port.

Including China, there are 139 countries involved in the initiative, making up 40% of the global economy, according to the Council on Foreign Relations.

Research from AidData shows that, since 2013, Chinese overseas lending has shifted away from sovereign borrowers toward state-owned companies and banks, joint ventures, and the private sector. As a result, these debts don’t typically appear on government balance sheets, though they are explicitly or implicitly covered by state liability protection.

This has blurred the distinction between private and public debt and created “major public financial management challenges for developing countries,” AidData found, with Chinese debt burdens being far higher than what credit agencies had understood.

“China has quickly established itself as the financier of first resort for many low-income and middle-income countries, but its international lending and grant-giving activities remain shrouded in secrecy,” said Ammar A. Malik, a senior researcher at AidData, in a statement.