Breakingviews-Capital Calls-Chinese Loans Tie Unexpected Chains
HONG KONG (Reuters Breakingviews) – FINE PRINT. China is sabotaging some of international credit cooperation, but not in the generally feared way. An analysis of 100 of the country’s loans to poor countries over the past two decades by US research firm AidData undermines arguments Beijing is trapping them in so-called debt traps: it hasn’t charged rates predators or demanded strategic assets such as ports as collateral. And while the sample used reflects less than 5% of an estimated $ 900 billion in credit that China has given to developing countries, the fine print of the contract reinforces concerns about China.
In addition to overly broad confidentiality clauses, 75% of the loans examined were excluded from restructuring agreements with the Paris Club group of lenders from developed countries. The China Development Bank often requires that if borrowers take action deemed unfavorable to a Chinese entity, it triggers a default. For rich countries seeking debt relief, AidData’s results ultimately raise as many trust issues as they solve. (By Pete Sweeney)
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