Commitments made to 100 developing nations by the Export-Import Bank of China and the China Development Bank have fallen every year since hitting a record in 2016 as the lenders scaled back financing even before the Covid pandemic struck in 2020. — China Daily
BEIJING: Loans committed by China’s two main trade policy banks fell to a 13-year low of US$3.7bil (RM15.9bil) in 2021 due to Beijing curtailing funding for large-scale oil projects, a study by Boston University’s Global Development Policy Centre shows.
Commitments made to 100 developing nations by the Export-Import Bank of China (China EximBank) and the China Development Bank (CDB) have fallen every year since hitting a record in 2016 as the lenders scaled back financing even before the Covid pandemic struck in 2020.
“We expect an overall shift towards lower volume, higher quality investment from China,” Kevin Gallagher, director of the university’s Global Development Policy Centre, told Reuters.
“China’s domestic priorities beyond Covid-19 are still significant, given the large amounts of debt and the swings in yuan that may necessitate the need to be conservative with dollar holdings so they can serve as insurance on the home front.”
China is the world’s largest bilateral lender, according to World Bank data.
Western countries such as the United States and multilateral lenders are pressing Beijing to offer debt relief to emerging economies in distress, such as Zambia and Sri Lanka.
China tends to disclose little on lending conditions and how it renegotiates with borrowers.
China EximBank and CBD made US$498bil (RM2.1 trillion) in loan commitments globally between 2008 and 2021 as part of Beijing’s “Belt and Road” infrastructure initiative.
General purpose lending to state-owned oil companies, for example in Angola, Brazil, Ecuador, Russia and Venezuela reached US$60bil (RM257bil) between 2009 and 2017.
Since then, lending has been less focused on petroleum producers, with Bangladesh and Sri Lanka among the top recipients.
The average size of loan pledges has also fallen, from US$534mil (RM2.3bil) between 2013 and 2017, to US$378mil (RM1.6bil) from 2018 and 2021.
Russia was the top recipient with US$58bil (RM249bil) in loans in the 2008 to 2021 period, followed by Venezuela with US$55bil (RM236bil).
Lending to the South American oil giant, mostly for extraction and pipeline projects, was halted in 2015, two years before it defaulted on its overseas debt.
Angola was the third largest recipient, with US$33bil (RM141.5bil) for projects in transport, agriculture, water and oil, with Kenya, Ethiopia and Egypt also among the top African borrowers.
While Chinese lending has been waning, World Bank lending has ramped up, the study found.
The Washington-based lender financed projects in developing countries worth an average of US$40bil (RM171.5bil) annually between 2016 and 2019.
That was before it scaled up its response to the pandemic in 2020, when it stepped in with US$67bil (RM287bil) – its largest annual commitment since 2008.
The following year, commitments were almost US$62bil (RM265.8bil), which was 17 times more than Chinese financing.
“The World Bank had a fixed amount of lending capacity, but this was accelerated as part of the Covid-19 response,” Gallagher said, adding that this might return to trend post-pandemic.
Overall, China’s commitments represented 83% of the US$601bil (RM2.78 trillion) lent by the World Bank from 2008 to 2021.
Reuters reported this month that the World Bank was seeking to vastly expand its lending capacity to address climate change and other global crises and would negotiate with shareholders ahead of April meetings on proposals, including a capital increase and new lending tools. — Reuters
