It is not evident what alternative developing countries have to the highly predatory BRI, which, despite its problems, remains the only show of its kind in town. While China has much to answer for, a large part of the blame should also be shared by the West for not offering any reasonable alterative. In multiple ways, therefore, these contracts have given China leverage in its dealings with vulnerable countries. The threat of China snapping diplomatic ties always hangs over debtors. The report also shows that certain provisions in Chinese contracts are political in nature, even where the intent is commercial.
Slowly, the true nature of Chinese lending got revealed as debt burdens mounted and China used impending defaults to make a go for strategic assets. For a large part of the developing world, the initial attraction to Chinese loans was a function of a sense of desperation in the absence of alternatives. China’s leverage over the developing world has increased in proportion to debt levels and the unsustainability of the loans it has extended.Ĭhina, of course, maintains that all it is doing is providing its own development aid and debt-financing model, which other lenders are not willing to offer.
The opacity of its lending through the BRI has raised hackles around the world, with China charged with pursuing a highly aggressive foreign policy in the garb of investment lending. President Xi Jinping’s ambitious global infrastructure investment strategy, the Belt and Road Initiative (BRI), is the critical anchor for much of its lending, with China emerging as the world’s biggest creditor, accounting for 65% of official bilateral debt. Underlining China as a “muscular and commercially savvy lender to the developing world", the report argues that the contracts in question “use creative design to manage credit risk and overcome enforcement hurdles." Some key provisions that define these contractual obligations include extreme confidentiality, a bar on borrowers from revealing loan terms, possible punishment of debtors for going against the interests of a ‘PRC entity’, and debt kept out of the purview of collective restructuring plans.
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