China’s international lending and developing world’s indebtedness increase: Report

Beijing [China], May 3 (ANI): China’s contribution to the global economy has not only increased but its international indebtedness also rose significantly, especially among the developing world, according to InsideOver.

China lends money to developing countries with high interest and with easier access to cash flow and it becomes difficult for the nations to repay.

You are reading: China’s international lending and developing world’s indebtedness increase: Report

The high-interest rate and easier access to cash flow have been deemed to be among the major reasons for the rise of debt sustained by developing countries that are barely managing to stay afloat economically.

China’s growing presence in the international financial market is also visible through the fact that it has an outstanding claim of more than 5 per cent of global GDP with almost all of the disbursement coming directly from the Chinese government and its state-controlled entities.

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This has also promoted it to become the largest bilateral creditor in the world with lending amounting to around USD 1.5 trillion through direct loans and credit lines to over and above 150 countries across the world, reported InsideOver.

According to the report published by Aid Data, from 2008 to 2021, China, as a ray of hope, always came to the rescue of countries already struggling with incurred debt from the Belt and Road Initiative.

It also noted how China has provided a staggering USD 240 billion in loans to countries in debt distress with a specific jump in lending from 2010.

The report has brought into question Beijing’s true intentions of overburdening weaker economies with sustained debt in order to exert its influence upon the region as a whole. However, these factors are only part of a larger sum in China’s international financial coercive means. If understood with its larger investments in portfolio debts amounting to USD 1 trillion of US treasury debt purchases along with trade credits, Beijing’s claim over the global economy soars to an astounding USD 5 trillion. This effectively means that the global economy currently owes more than 6 per cent of its total GDP to China, according to InsideOver.

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The report also determined the extent of China’s target countries. Middle-income countries were amongst the more prominent borrowers from Chinese banks which included countries such as Argentina, Pakistan, and Egypt among others. Low-income countries too were amongst the largest borrowers with countries specifically from Africa dependent on Chinese loans. The case of Zambia, Ghana and Kenya have previously also been seeking such relief loans in order to maintain their economies.

Yet the African continent as a whole has been granted excessive debt in order to gain influence over its natural resources, InsideOver reported.

Zambia is facing an unsustainable debt burden, and debt servicing is leaving little room for capital formation, especially funds needed for infrastructure development, reported Africa Daily Digital.

While the country is struggling to take up World Bank-suggested reforms such as restoring fiscal and long-term debt sustainability, increasing farmers’ productivity and access to agricultural markets, ensuring access to energy and finance, and private sector development, it is facing a scarcity of resources, which makes the country dependent on and vulnerable to external debt. (ANI)

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