POSTMODERN IMPERIALI$M
China Lent $1.34 Trln in 2000-2021, Focus Shifts From Belt and Road to Rescue Finance-Report
A person stands in front of a sign of the Third Belt and Road Forum ahead of its opening ceremony, near the media centre in Beijing, China, October 18, 2023. REUTERS/Tingshu Wang/File PhotoREUTERS
By Rachel Savage and Clare Baldwin
JOHANNESBURG/HONG KONG (Reuters) - Chinese financial institutions lent $1.34 trillion to developing countries from 2000 to 2021, U.S. researchers at AidData said in a report that showed the world's biggest bilateral lender switching from infrastructure to rescue lending.
While lending commitments peaked at almost $136 billion in 2016, China still committed to almost $80 billion of loans and grants in 2021 according to the data, which captures almost 21,000 projects in 165 low and middle income countries as probably the most comprehensive dataset of its type.
Overseas finance has won Beijing allies across the developing world, while drawing criticism from the West and in some recipient countries, including Sri Lanka and Zambia, that infrastructure projects it funded saddled them with debt they were unable to repay.
Both the sources and the focus of China's overseas financing, have changed, the data showed.
In 2013, when President Xi Jinping launched the Belt and Road Initiative to build infrastructure across the developing world, China's policy banks accounted for over half of the lending. Their share started falling from 2015 and was 22% by 2021.
The People's Bank of China and the State Administration of Foreign Exchange (SAFE), which manages China's foreign currency reserves, accounted for more than half of lending in 2021, almost all bailout lending.
"Beijing is navigating an unfamiliar and uncomfortable role— as the world's largest official debt collector," said the report by AidData, a research lab at William and Mary university.
Much of China's growing rescue lending is denominated in renminbi, the report found, with loans in the Chinese currency overtaking U.S. dollars in 2020. Overdue payments to Chinese lenders have also risen.
One way China is managing repayment risk is through foreign currency cash escrow accounts it controls, AidData said. The arrangement is controversial because it gives China debt seniority, meaning other lenders, including multilateral development banks, could get paid second during any coordinated debt relief.
AidData identified 15 countries, primarily in Africa, with escrow accounts totalling a combined $2.5 billion at their peak in June 2023.
Brad Parks, the study's lead author, said they were not able to identify all such accounts, as they are normally kept private. He noted, though, that they had found collateralised loans worth $614 billion and that cash was the main source of collateral required by Chinese lenders, indicating that the amount in escrow accounts could be far higher than $2.5 billion.
China is also working more with multilateral lenders and Western commercial banks. Half of its non-emergency lending in 2021 was syndicated loans, 80% of that alongside Western banks and international financial institutions.
The destinations of Chinese overseas lending have also changed. Loan commitments to African countries fell from 31% of the total in 2018 to 12% in 2021, while lending to European countries almost quadrupled to 23%.
A different dataset showed loan commitments to African countries falling to a 20-year low in 2022.
(Reporting by Rachel Savage and Clare Baldwin; Editing by Tomasz Janowski)
Copyright 2023 Thomson Reuters.
Instead of lending money for highways and bridges, China has shifted to providing emergency rescues for previous borrowers.
A construction project in Colombo, Sri Lanka, in 2018 that was funded with money from China.
Credit...Adam Dean for The New York Times
By Keith Bradsher
Reporting from Beijing and Guangzhou, China
Nov. 6, 2023
After lending $1.3 trillion to developing countries, mainly for big-ticket infrastructure projects, China has shifted its focus to bailing out many of those same countries from piles of debt.
The initial loans were mostly part of the Belt and Road Initiative, which Xi Jinping, China’s top leader, started in 2013 to build stronger transportation, communications and political links in more than 150 countries.
But now the two main Chinese state banks that provided most of the infrastructure loans have reduced their new lending. Rescue loans climbed to 58 percent of China’s lending to low- and middle-income countries in 2021 from 5 percent in 2013, according to a new report from AidData, a research institute at William and Mary, a university in Williamsburg, Va., that compiles comprehensive information about Chinese development financing.
“Beijing is navigating an unfamiliar and uncomfortable role — as the world’s largest official debt collector,” the institute wrote.
While the Belt and Road Initiative bought geopolitical clout for Beijing and helped finance economically useful projects, Chinese loans were also used to build expensive projects that have not spurred economic growth and have loaded countries with debt they are now unable to repay.
Much of the recent lending by Beijing consists of loans from China’s central bank to the central banks of countries that took out Belt and Road Initiative loans. Another large and growing chunk is from state-controlled Chinese commercial banks, working in conjunction with groups of Western banks.
Unpaid debts to China are part of billions owed by developing countries to other nations, to the International Monetary Fund and to private lenders. Unsustainable debt has been a longstanding problem for poorer nations. But recent economic shocks caused by the Covid pandemic and a global surge in energy and food prices from the Russian invasion of Ukraine have made the current cycle especially acute.
A light rail project in Lagos, Nigeria, seen in 2015, was part of the Belt and Road initiative China undertook to forge closer ties with developing nations.
Credit...Tyler Hicks/The New York Times
China is shifting the focus of its lending as the United States seeks to match China’s early success in establishing strong ties to developing countries.
China is shifting the focus of its lending as the United States seeks to match China’s early success in establishing strong ties to developing countries.
The United States International Development Finance Corporation, created by the Trump administration and Congress in response to the Belt and Road Initiative, plans to announce this week a $125 million loan for shipyard modernization in Greece and up to $553 million in lending for port expansion in Sri Lanka, said American officials with a detailed knowledge of the plans, who were not authorized to speak publicly about the loans before they were announced.
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China’s early, rapid expansion of the Belt and Road Initiative alarmed U.S. officials, who saw the program as eroding American influence. The Trump administration and Congress merged and expanded two agencies in 2018 to create the development finance corporation. The agency provided $9.3 billion in project financing in the 12 months that ended on Sept. 30, up from $7.4 billion the previous year.
Between 2014 and 2017, AidData found, China was providing nearly three times as much development financing as the United States. But by 2021, China was outspending the United States by only 30 percent.
Sri Lanka was the site of one of the most politically charged Chinese infrastructure projects: the construction of a $1.1 billion port in Hambantota, a town about 130 miles southeast of Colombo that was the political base of Mahinda Rajapaksa, who was then Sri Lanka’s president. The port attracted little traffic. When the project was unable to pay its debts, Chinese entities got a 99-year lease for the port and 15,000 acres of land around it. (The American loan for up to $553 million would be for expansion of the busy port in Colombo, Sri Lanka’s capital and main city.)
The Piraeus Container Terminal, operated by Cosco, a Chinese state-owned shipping giant, in Athens in 2017.
Credit...Angelos Tzortzinis for The New York Times
Much of the work for the Belt and Road Initiative has been done by Chinese construction and engineering companies, which sent thousands of engineers, heavy equipment operators and other specialists across Asia, Africa, Latin America, Eastern Europe and the Pacific.
AidData calculated that China had lent $1.3 trillion since 2000, almost all to Belt and Road Initiative countries.
China provided the money almost entirely as loans, not grants, and the loans tended to be at adjustable interest rates. As global interest rates have soared for the past two years, poor countries have found themselves owing far higher payments to Beijing than they expected.
Chinese lenders and contractors were able to build projects rapidly because the Chinese government seldom required extensive environmental studies, financial viability reviews or checks on the displacement of local populations forced to give up land. National governments of developing countries were required to guarantee repayment of loans made to their local and provincial governments.
In the early years, 65 percent of the loans were made by China’s state-owned policy banks, notably the China Development Bank and the Export-Import Bank of China, AidData found. But faced with many problem loans, they have cut back, and by 2021 those loans represented less than a quarter of lending.
Chinese commercial banks with stock market listings but with controlling stakes still held by the government now represent another quarter of lending. But they provide loans mainly to developing countries through Western banks that have tighter lending standards.
Chinese officials defend their current lending policies toward developing countries as prudent, while avoiding direct discussion of previous loans.
“Development must be safeguarded with protection against risk,” Guo Lei, the vice president of global finance at China Development Bank, said at the International Finance Forum at the end of October in Guangzhou, China.
Much of the work for the Belt and Road Initiative has been done by Chinese construction and engineering companies, which sent thousands of engineers, heavy equipment operators and other specialists across Asia, Africa, Latin America, Eastern Europe and the Pacific.
AidData calculated that China had lent $1.3 trillion since 2000, almost all to Belt and Road Initiative countries.
China provided the money almost entirely as loans, not grants, and the loans tended to be at adjustable interest rates. As global interest rates have soared for the past two years, poor countries have found themselves owing far higher payments to Beijing than they expected.
Chinese lenders and contractors were able to build projects rapidly because the Chinese government seldom required extensive environmental studies, financial viability reviews or checks on the displacement of local populations forced to give up land. National governments of developing countries were required to guarantee repayment of loans made to their local and provincial governments.
In the early years, 65 percent of the loans were made by China’s state-owned policy banks, notably the China Development Bank and the Export-Import Bank of China, AidData found. But faced with many problem loans, they have cut back, and by 2021 those loans represented less than a quarter of lending.
Chinese commercial banks with stock market listings but with controlling stakes still held by the government now represent another quarter of lending. But they provide loans mainly to developing countries through Western banks that have tighter lending standards.
Chinese officials defend their current lending policies toward developing countries as prudent, while avoiding direct discussion of previous loans.
“Development must be safeguarded with protection against risk,” Guo Lei, the vice president of global finance at China Development Bank, said at the International Finance Forum at the end of October in Guangzhou, China.
Sri Lankan workers welcomed a Chinese research ship in Hambantota International Port in 2022. China provided financing for the port, but the project didn’t attract much traffic and couldn’t pay its debts.
Credit...Eranga Jayawardena/Associated Press
Emergency rescue loans from China, usually from China’s central bank, go mainly to countries that are struggling to repay previous loans from Beijing financial institutions, said Bradley Parks, the executive director of AidData.
The institute’s new report found that China’s average rescue loan package in recent years to countries already heavily in debt to China was $965 million. By comparison, countries that did not owe much to Chinese creditors received average rescue loans of $26 million, AidData found.
The International Monetary Fund extends more money in rescue loans each year than China, although the gap has been closing. Beijing increasingly finds itself at odds with the I.M.F. and other creditors over who accepts losses when relieving debt pressure on developing countries.
Reza Baqir, a former I.M.F. official who became the governor of Pakistan’s central bank until 2022, said at the forum in Guangzhou that China’s financial rescues should not be seen as competition for the I.M.F.
“I see it very much as complementary, rather than a trade-off of going to the I.M.F.,” he said.
Keith Bradsher is the Beijing bureau chief for The Times. He previously served as bureau chief in Shanghai, Hong Kong and Detroit and as a Washington correspondent. He has lived and reported in mainland China through the pandemic.
Emergency rescue loans from China, usually from China’s central bank, go mainly to countries that are struggling to repay previous loans from Beijing financial institutions, said Bradley Parks, the executive director of AidData.
The institute’s new report found that China’s average rescue loan package in recent years to countries already heavily in debt to China was $965 million. By comparison, countries that did not owe much to Chinese creditors received average rescue loans of $26 million, AidData found.
The International Monetary Fund extends more money in rescue loans each year than China, although the gap has been closing. Beijing increasingly finds itself at odds with the I.M.F. and other creditors over who accepts losses when relieving debt pressure on developing countries.
Reza Baqir, a former I.M.F. official who became the governor of Pakistan’s central bank until 2022, said at the forum in Guangzhou that China’s financial rescues should not be seen as competition for the I.M.F.
“I see it very much as complementary, rather than a trade-off of going to the I.M.F.,” he said.
Keith Bradsher is the Beijing bureau chief for The Times. He previously served as bureau chief in Shanghai, Hong Kong and Detroit and as a Washington correspondent. He has lived and reported in mainland China through the pandemic.
China’s Role in Reviving Global Economy
By: Prof. Engr. Zamir Ahmed Awan
MODERN DIPLOMACY
Date: November 7, 2023
China stands as a beacon of economic prowess, renowned as the world’s manufacturing hub, and a powerhouse of trade. Its formidable reputation as the largest exporter is underpinned by unparalleled factors: competitive pricing, unmatched quality, speedy deliveries, and staggering volumes. Chinese products dominate international markets, thanks to the efficiency of its labour force and reasonable labour costs. Moreover, China’s abundance of raw materials further reduces product costs, making them irresistibly competitive on a global scale. This competitive edge, coupled with China’s enticing policies, fuels the nation’s entrepreneurs, driving increased production and exports.
Yet, China’s significance in the global economy extends beyond its exporting prowess; it is also one of the world’s largest importers. With a colossal market boasting 1.4 billion consumers and high purchasing power, China provides a fertile ground for imported goods. In a unique approach, China not only promotes exports but also hosts the world’s only Import Expo, showcasing a commitment to global responsibility, multilateralism, and narrowing trade gaps with other nations. To further enhance its imports, China is the only country in the world, organizing Impost expos. Usually many countries only promote exports and organize export expos. China is unique in this respect, as it understands its global responsibility and promote multilateralism and sincerely desires to narrow down the trade gaps with other nations.
The sixth China International Import Expo (CIIE), scheduled for Nov. 5-10 in Shanghai, has attracted attendees from 154 countries, regions and international organizations, including the least developed, developing and developed nations. Over the past five years, the annual China International Import Expo (CIIE) has become a symbol of China’s high-level opening-up and an emblem of its ongoing endeavours to build an open global economy. It has attracted attendees from 154 countries, regions and international organizations, including the least developed, developing and developed nations. Approximately 200 companies have committed to participating for the sixth consecutive year. In the Country Exhibition, among the 69 countries participating, 16 are the least developed countries. Various agricultural and handicraft products from them will be showcased. The exhibition area of the expo will be around 367,000 square meters, and 289 Global Fortune 500 companies and industry-leading enterprises are poised to attend the expo, both exceeding the previous levels.
The increased participation of countries and multinationals in the expo signals the world’s strong confidence in China’s economy, which saw a 5.2-percent gross domestic product (GDP) growth in the first nine months of the year. The event’s expansion also reflects a global eagerness to explore China’s enormous market, driven by robust demand and significant consumption potential resulting from China’s success in reducing poverty and nurturing one of the world’s largest middle-class cohorts.
This increased global engagement signifies the world’s strong confidence in China’s economy, bolstered by a 5.2% GDP growth in the first nine months of the year. The event’s expansion reflects global enthusiasm to explore China’s vast market, driven by robust demand and significant consumption potential resulting from China’s success in reducing poverty and nurturing a thriving middle class.
China’s dominance is evident in sectors like electric vehicles (EVs), where it stands as the world’s largest market. In 2022, over 60% of global electric car sales occurred in China, housing more than half of the world’s total EVs. Recognizing this potential, international companies launch their flagship products at China’s import expo, tailored to meet the evolving needs of Chinese consumers. “The CIIE prompts us to identify export opportunities that align with China’s demands, ultimately benefiting Thailand,” stated Phumtham Wechayachai, Deputy Prime Minister of Thailand, reflecting the expo’s global impact.
That’s not all. The import expo has gone beyond being a mere trade fair. It has served as a window for the world to closely observe and better understand China’s new development paradigm, where domestic and overseas markets reinforce each other, with the domestic market as the mainstay. China has stressed that making the domestic market the mainstay does not mean the country will develop its economy with the door closed, a fact affirmed by the expo.
The expo exemplifies how the new paradigm works. By giving full play to the potential of the domestic market, both domestic and foreign markets can be better connected and utilized to realize robust and sustainable development.
Furthermore, the CIIE has evolved into an international public good, facilitating global business ties, innovative exchanges, and enduring relationships. Josie Zhang, President of Burberry China, underscores the expo’s significance: “The CIIE offers exciting new platforms for global businesses and partners to strengthen ties, exchange ideas steeped in innovation, and forge lasting relationships with one another.”
In a world grappling with the aftermath of the pandemic and resistance against globalization, the CIIE showcases China’s commitment to expanding the global market, enhancing mechanisms for benefit sharing, and promoting genuine multilateralism. This expo serves as a catalyst for rebuilding global consensus, fostering an open world economy, and nurturing authentic international cooperation.
China’s instrumental role in reviving the global economy post-COVID is undeniable, and the CIIE promises far-reaching impacts on the global economic landscape. The nation’s dedication to fostering collaboration and mutual growth is not just commendable—it is transformative.
Prof. Engr. Zamir Ahmed Awan
Sinologist (ex-Diplomat), Non-Resident Fellow of CCG (Center for China and Globalization), National University of Sciences and Technology (NUST), Islamabad, Pakistan.
By: Prof. Engr. Zamir Ahmed Awan
MODERN DIPLOMACY
Date: November 7, 2023
China stands as a beacon of economic prowess, renowned as the world’s manufacturing hub, and a powerhouse of trade. Its formidable reputation as the largest exporter is underpinned by unparalleled factors: competitive pricing, unmatched quality, speedy deliveries, and staggering volumes. Chinese products dominate international markets, thanks to the efficiency of its labour force and reasonable labour costs. Moreover, China’s abundance of raw materials further reduces product costs, making them irresistibly competitive on a global scale. This competitive edge, coupled with China’s enticing policies, fuels the nation’s entrepreneurs, driving increased production and exports.
Yet, China’s significance in the global economy extends beyond its exporting prowess; it is also one of the world’s largest importers. With a colossal market boasting 1.4 billion consumers and high purchasing power, China provides a fertile ground for imported goods. In a unique approach, China not only promotes exports but also hosts the world’s only Import Expo, showcasing a commitment to global responsibility, multilateralism, and narrowing trade gaps with other nations. To further enhance its imports, China is the only country in the world, organizing Impost expos. Usually many countries only promote exports and organize export expos. China is unique in this respect, as it understands its global responsibility and promote multilateralism and sincerely desires to narrow down the trade gaps with other nations.
The sixth China International Import Expo (CIIE), scheduled for Nov. 5-10 in Shanghai, has attracted attendees from 154 countries, regions and international organizations, including the least developed, developing and developed nations. Over the past five years, the annual China International Import Expo (CIIE) has become a symbol of China’s high-level opening-up and an emblem of its ongoing endeavours to build an open global economy. It has attracted attendees from 154 countries, regions and international organizations, including the least developed, developing and developed nations. Approximately 200 companies have committed to participating for the sixth consecutive year. In the Country Exhibition, among the 69 countries participating, 16 are the least developed countries. Various agricultural and handicraft products from them will be showcased. The exhibition area of the expo will be around 367,000 square meters, and 289 Global Fortune 500 companies and industry-leading enterprises are poised to attend the expo, both exceeding the previous levels.
The increased participation of countries and multinationals in the expo signals the world’s strong confidence in China’s economy, which saw a 5.2-percent gross domestic product (GDP) growth in the first nine months of the year. The event’s expansion also reflects a global eagerness to explore China’s enormous market, driven by robust demand and significant consumption potential resulting from China’s success in reducing poverty and nurturing one of the world’s largest middle-class cohorts.
This increased global engagement signifies the world’s strong confidence in China’s economy, bolstered by a 5.2% GDP growth in the first nine months of the year. The event’s expansion reflects global enthusiasm to explore China’s vast market, driven by robust demand and significant consumption potential resulting from China’s success in reducing poverty and nurturing a thriving middle class.
China’s dominance is evident in sectors like electric vehicles (EVs), where it stands as the world’s largest market. In 2022, over 60% of global electric car sales occurred in China, housing more than half of the world’s total EVs. Recognizing this potential, international companies launch their flagship products at China’s import expo, tailored to meet the evolving needs of Chinese consumers. “The CIIE prompts us to identify export opportunities that align with China’s demands, ultimately benefiting Thailand,” stated Phumtham Wechayachai, Deputy Prime Minister of Thailand, reflecting the expo’s global impact.
That’s not all. The import expo has gone beyond being a mere trade fair. It has served as a window for the world to closely observe and better understand China’s new development paradigm, where domestic and overseas markets reinforce each other, with the domestic market as the mainstay. China has stressed that making the domestic market the mainstay does not mean the country will develop its economy with the door closed, a fact affirmed by the expo.
The expo exemplifies how the new paradigm works. By giving full play to the potential of the domestic market, both domestic and foreign markets can be better connected and utilized to realize robust and sustainable development.
Furthermore, the CIIE has evolved into an international public good, facilitating global business ties, innovative exchanges, and enduring relationships. Josie Zhang, President of Burberry China, underscores the expo’s significance: “The CIIE offers exciting new platforms for global businesses and partners to strengthen ties, exchange ideas steeped in innovation, and forge lasting relationships with one another.”
In a world grappling with the aftermath of the pandemic and resistance against globalization, the CIIE showcases China’s commitment to expanding the global market, enhancing mechanisms for benefit sharing, and promoting genuine multilateralism. This expo serves as a catalyst for rebuilding global consensus, fostering an open world economy, and nurturing authentic international cooperation.
China’s instrumental role in reviving the global economy post-COVID is undeniable, and the CIIE promises far-reaching impacts on the global economic landscape. The nation’s dedication to fostering collaboration and mutual growth is not just commendable—it is transformative.
Prof. Engr. Zamir Ahmed Awan
Sinologist (ex-Diplomat), Non-Resident Fellow of CCG (Center for China and Globalization), National University of Sciences and Technology (NUST), Islamabad, Pakistan.
Pakistan third top recipient of Chinese finance: study
Kazim Alam
The energy portfolio of $28.4bn was the biggest in the world, with Angola ($24.7bn) and Vietnam ($21.7bn) following as the second and third biggest recipients of Chinese development finance over the same period. Pakistan’s energy portfolio represented 10.2pc of China’s entire global energy portfolio across dozens of countries, the AidData report claims.
An administration-wise breakdown of Chinese development finance between 2000 and 2021 showed that the PML-N government (2013-17) managed to attract the highest flows ($36.2bn) in the 21-year period. The PTI government attracted $19.6bn, the PPP government $10.4bn and the Musharraf government $4.1bn.
The energy sector was the biggest recipient of development finance (52.8pc) under the PML-N government while “general budget support” remained the top destination (61.3pc) of flows under the PTI government, data showed.
Since 2012, China has been Pakistan’s single-largest foreign development financing provider, outspending the United States by 1.6 times in 2013, 7.7 times in 2016 and 22.4 times in 2021.
Data showed 82pc of the projects committed until 2021 were “completed” with another 13pc remaining “under implementation”.
Out of 47 projects worth more than $500 million, the majority were in general budget support (21), followed by energy (15) and banking and financial services (six). As for the 17 projects of more than $1bn, six were in general budget support and five were in energy.
Data showed the annual rate of commitments rose from $509m during the Musharraf era to $2.1bn in the PPP government. It hit $7.2bn a year in the Sharif/Abbasi years. In the years of the PTI government, average annual commitments amounted to $4.9bn but those were driven by general budget support lending, data showed.
With a total of 161 loans worth $68.9bn, Pakistan constituted China’s third largest country-level loan portfolio anywhere in the world, after Russia and Venezuela, the report claims.
At $28.13bn, rescue lending to Pakistan originating in China was the highest in the world, followed by Argentina, Ecuador and Venezuela. This points to the “particularly close all-weather friendship between the two countries,” it said.
Pakistan’s public debt exposure to China is $67.2bn, which is 19.6pc of GDP. “Since 2017, larger proportions of Chinese development finance are for rescue loans, rather than developmental projects, which was the hallmark of CPEC in its heyday (2014-2017) when fresh commitments were forthcoming in large values,” said the report.
The post-2017 years also saw roll-overs become more common and either matched or exceeded new loan commitments since 2019.
Out of 127 infrastructure projects worth $38.8bn, only three projects worth $452m have been suspended or cancelled thus far, data showed.
More than half (52pc) of the infrastructure project portfolio has faced some Environmental, Social and Governance (ESG) risks, according to AidData’s estimates. The energy sector has faced the greatest ESG risks with 51pc of the portfolio facing one or more of these challenges, it claims.
Only a quarter of these projects have strong ESG safeguards in place, as per AidData’s classification. As opposed to only 16pc and 19pc for environmental and governance risks, respectively, as many as 46pc of these projects faced social risks such as labour violations or community protests, the report claims.
Published in Dawn, November 7th, 2023
Published November 7, 2023
Lahore Orange Line Metro is one of the 127 infrastructure projects worth $38.8bn that China financed between 2000 and 2021 in Pakistan.
—Courtesy CPEC website
KARACHI: Pakistan is the third biggest recipient of Chinese development finance worldwide with a portfolio of $70.3 billion, according to a report released on Monday by AidData, a US-based international development research lab.
Only two per cent of China’s portfolio in Pakistan between 2000 and 2021 consisted of grants while the rest was in the form of loans, says the AidData report that claims to have drawn its conclusions using data from more than 5,300 sources.
The average interest rate on loans was 3.72pc with an average maturity period of 9.84 years and a grace period of 3.74 years, according to the American research house.
The top sector that received development finance in 2000-2021 was energy with a share of 40pc or $28.4bn. General budget support (30pc share or $21.3bn) and transport and storage (14pc share or $9.7bn) were the next two major recipients of Chinese financing, data shows.
KARACHI: Pakistan is the third biggest recipient of Chinese development finance worldwide with a portfolio of $70.3 billion, according to a report released on Monday by AidData, a US-based international development research lab.
Only two per cent of China’s portfolio in Pakistan between 2000 and 2021 consisted of grants while the rest was in the form of loans, says the AidData report that claims to have drawn its conclusions using data from more than 5,300 sources.
The average interest rate on loans was 3.72pc with an average maturity period of 9.84 years and a grace period of 3.74 years, according to the American research house.
The top sector that received development finance in 2000-2021 was energy with a share of 40pc or $28.4bn. General budget support (30pc share or $21.3bn) and transport and storage (14pc share or $9.7bn) were the next two major recipients of Chinese financing, data shows.
The energy portfolio of $28.4bn was the biggest in the world, with Angola ($24.7bn) and Vietnam ($21.7bn) following as the second and third biggest recipients of Chinese development finance over the same period. Pakistan’s energy portfolio represented 10.2pc of China’s entire global energy portfolio across dozens of countries, the AidData report claims.
An administration-wise breakdown of Chinese development finance between 2000 and 2021 showed that the PML-N government (2013-17) managed to attract the highest flows ($36.2bn) in the 21-year period. The PTI government attracted $19.6bn, the PPP government $10.4bn and the Musharraf government $4.1bn.
The energy sector was the biggest recipient of development finance (52.8pc) under the PML-N government while “general budget support” remained the top destination (61.3pc) of flows under the PTI government, data showed.
Since 2012, China has been Pakistan’s single-largest foreign development financing provider, outspending the United States by 1.6 times in 2013, 7.7 times in 2016 and 22.4 times in 2021.
Data showed 82pc of the projects committed until 2021 were “completed” with another 13pc remaining “under implementation”.
Out of 47 projects worth more than $500 million, the majority were in general budget support (21), followed by energy (15) and banking and financial services (six). As for the 17 projects of more than $1bn, six were in general budget support and five were in energy.
Data showed the annual rate of commitments rose from $509m during the Musharraf era to $2.1bn in the PPP government. It hit $7.2bn a year in the Sharif/Abbasi years. In the years of the PTI government, average annual commitments amounted to $4.9bn but those were driven by general budget support lending, data showed.
With a total of 161 loans worth $68.9bn, Pakistan constituted China’s third largest country-level loan portfolio anywhere in the world, after Russia and Venezuela, the report claims.
At $28.13bn, rescue lending to Pakistan originating in China was the highest in the world, followed by Argentina, Ecuador and Venezuela. This points to the “particularly close all-weather friendship between the two countries,” it said.
Pakistan’s public debt exposure to China is $67.2bn, which is 19.6pc of GDP. “Since 2017, larger proportions of Chinese development finance are for rescue loans, rather than developmental projects, which was the hallmark of CPEC in its heyday (2014-2017) when fresh commitments were forthcoming in large values,” said the report.
The post-2017 years also saw roll-overs become more common and either matched or exceeded new loan commitments since 2019.
Out of 127 infrastructure projects worth $38.8bn, only three projects worth $452m have been suspended or cancelled thus far, data showed.
More than half (52pc) of the infrastructure project portfolio has faced some Environmental, Social and Governance (ESG) risks, according to AidData’s estimates. The energy sector has faced the greatest ESG risks with 51pc of the portfolio facing one or more of these challenges, it claims.
Only a quarter of these projects have strong ESG safeguards in place, as per AidData’s classification. As opposed to only 16pc and 19pc for environmental and governance risks, respectively, as many as 46pc of these projects faced social risks such as labour violations or community protests, the report claims.
Published in Dawn, November 7th, 2023
