Not long ago, the actual situation of the Chinese regime’s debt elimination for 23 loans from 17 African countries was revealed by research organizations. However, the total debt elimination is only about 1% of the total amount the Chinese regime lends to Africa.
In recent years, more and more countries that borrow money from China have fallen into financial distress and cannot repay their loans. China is also facing a situation where many projects are unfinished due to debt.
On August 18 of this year, Chinese Foreign Minister Wang Yi said at the Forum on China-Africa Cooperation (FOCAC) that Beijing would write off 23 interest-free loans due at the end of 2021 for 17 African countries. However, Wang Yi did not specify which 17 countries or the amount of these 23 debts.
According to an assessment by the Global Development Policy Center of Boston University, based on the database of Chinese loans to Africa, 23 debts that China has written off to Africa total no more than $610 million, and the lowest is $45 million.
The Center’s statistics show the Chinese regime has committed to providing $53.8 billion in debt to Africa between 2000 and 2012, due to maturity at the end of 2021. Therefore, Wang Yi’s high-profile announcement of debt elimination in August this year only involved about 1% of China’s total loans to Africa.
Frank Tian Xie, a professor of Marketing at the University of South Carolina’s Aiken School of Business and an expert on China affairs, told The Epoch Times on September 14 that the CCP had announced loudly about writing off the debts of 17 countries. Still, in the end, only a tiny amount of money was written off, exposing the Chinese regime’s lies and deception at home and abroad.
Xie Tian said that the CCP’s “Belt and Road” initiative is unethical and unrighteous. Western countries have criticized Beijing for leaving many less developed countries with heavy debts. Therefore, the CCP feels pressure from the international community, so it has announced the elimination of some debts to show its so-called goodwill in response to criticism from the international community. However, the amount of debt written off is very small, and it is essentially several debts that cannot be repaid.
A jointly completed Report, “How China Lends,” by the American research institute AidData, the Center for Global Development, and the Kiel Institute for the World Economy in Germany, was released last March. The report said that from 2000 to 2017, the total direct lending committed by the Beijing regime was about $560 billion, and Asia, South America, and Africa are China’s primary “beneficiaries.”
Typically, IMF loans require borrowers to disclose details of their credit lines, debt elimination, and restructuring plans. However, AidData and other reports say that the Chinese regime’s lending contracts often contain agreements prohibiting the borrower country from disclosing contract details, so contract performance is a covert operation.
The CCP ostensibly promotes friendship with the borrower and helps with their economic development. Still, examining a few revealed that its lending contracts could be very harsh and not beneficial to the borrower.
In sample contracts studied by AidData, 55% of total loan contracts required the borrower to open a lender-controlled revenue account to secure repayment. All income from CCP-sponsored projects must be deposited into this particular account, and the China side has the right to use the account balance to offset the account holder’s debt. The borrower must maintain a specified minimum balance in the account, usually the amount of principal, interest, and fees payable annually under the debt contract.
For example, in a contract signed between the CCP and Venezuela, it is stated that the China Development Bank, as a lender, has the right to use all or part of the funds in the lender-controlled revenue accounts at any time without notifying the State Development Bank of Venezuela.
In addition, more than 90% of the contracts studied by AidData stipulate that the CCP can terminate the agreement in case of a significant change in law or policy in the borrower’s country and require immediate repayment of the loan disbursement. 30% of the contracts stipulate that the borrower is responsible for the costs caused by the changing environment and labor policies.
Nearly three-quarters of the contracts have a clause that forbids dealing with debt restructuring (or similar restructuring) through the Paris Club. The “Paris Club” is an important international platform for resolving debt restructuring between the two governments.
The CCP’s foreign loans have political purposes
Xie Tian said that the relevant countries’ considerable debts to China are all made by the CCP while promoting the “Belt and Road” initiative and participating in diplomacy activities by being bribed with money. Therefore, it cannot be regarded as aid or investment at all. Still, it is strongly politically motivated to force these countries to vote in favor of China in the United Nations and international human rights organizations.
According to statistics from the report “How China Lends,” all of China’s foreign loans come from the Chinese regime’s banks and are arranged by the regime.
AidData wrote, according to an analysis by Morris and others, that 1,046 loans granted by the regime to 130 countries between 2000 and 2014 show 55% of the funding came from the Export-Import Bank of China and 36% from the China Development Bank.
A report released by the Hudson Institute in September this year said that the CCP has strongly promoted the “Belt and Road” initiative. In addition to creating business opportunities for Chinese companies, the larger aim is to ensure that all roads, railways, ports, power cables, digital networks, and infrastructure are all aimed at serving the interests of the Chinese regime.
Most CCP investments are not economically sustainable because political considerations drive lending. A report released in April 2019 by the Center for a New American Security (CNAS), an American think-tank, said that many completed “Belt and Road” projects had worsened the finances of the borrowing countries.
Many debts have become unfinished projects of the CCP
Xie Tian said that many debtor countries could not repay Beijing’s debts, and relevant officials have embezzled many funds. So this debt has become an unfinished project of the Chinese regime.
Many of Beijing’s loan agreements include “resource swap loans” and “debt by equity and infrastructure.”
AidData’s research shows that in nearly 40% of the ender-controlled revenue accounts of the borrowing countries, the money in the accounts comes from income unrelated to the project. For example, in the special collection accounts of Ecuador and Venezuela, there is income from oil exports. Ender-controlled revenue accounts in Ghana with export earnings from bauxite ore. Costa Rican accounts with income from financial assets. These funds are used to repay the debt to the CCP.
AidData cites examples in its report:
In 2010, the China Development Bank provided Ecuador with a $1 billion loan for an oil project. Of which 20% of the loan amount must be used to purchase goods and services from identified Chinese contractors.
In addition, the loan agreement requires the Ecuadorian oil company to sell at least 380,000 barrels of fuel per month to China Petroleum during the contract’s validity period. Also, to supply 15,000 barrels of crude per day. All proceeds are transferred to the ender-controlled revenue account of Ecuador. This account was opened at the China Development Bank in China and is managed under Chinese law.
In 2017, the West African nation of Sierra Leone signed a $659 million loan agreement with the Industrial and Commercial Bank of China and the Export-Import Bank of China to upgrade and expand Queen Elizabeth II Pier. The loan size is equivalent to 15% of Sierra Leone’s 2017 GDP. Still, the primary purpose of this loan is to provide financial security for the harbor expansion project of a consortium of Chinese construction, procurement, and technology companies.
In addition, these contracts contain mortgage agreements for shares and mortgage agreements for assets. Borrowers must pledge their stake in the project, as well as equipment and other assets in the project, as collateral to repay the loan.
Also, in 2017, due to the inability to repay its debt, Sri Lanka was forced to hand over the 99-year operating rights of Hambantota Port to the Chinese regime to repay the debt, which sparked outrage and strong criticism from the international community.