Skip to main content

China granted 104bn rescue loans.

 

China map
China has sig­ni­fic­antly expan­ded its bail­out lend­ing as its Belt and Road Ini­ti­at­ive blows up fol­low­ing debt write-offs, scan­dal-rid­den projects and alleg­a­tions of cor­rup­tion.

A study pub­lished yes­ter­day shows China gran­ted $104bn worth of res­cue loans to devel­op­ing coun­tries between 2019 and the end of 2021. The fig­ure for these years is almost as large as the coun­try’s bail­out lend­ing over the pre­vi­ous two dec­ades.

The study by research­ers at Aid­Data, World Bank, Har­vard Kennedy School and Kiel Insti­tute for the World Eco­nomy is the first known attempt to cap­ture total Chinese res­cue lend­ing on a global basis.

Between 2000 and the end of 2021, China under­took 128 bail­out oper­a­tions in 22 debtor coun­tries worth a total of $240bn.

China’s emer­gence as a highly influ­en­tial «lender of last resort» presents crit­ical chal­lenges for west­ern-led insti­tu­tions such as the IMF, which have sought to safe­guard global fin­an­cial sta­bil­ity since the end of the second world war.

Sri Lanka pres­id­ent Ranil Wick­remes­inghe called on China and other cred­it­ors last week to quickly reach a com­prom­ise on debt restruc­tur­ing after the IMF approved a $3bn four-year lend­ing pro­gramme for his nation.

China has declined to par­ti­cip­ate in mul­ti­lat­eral debt res­ol­u­tion pro­grammes even though it is a mem­ber of the IMF. Ghana, Pakistan and other troubled debt­ors that owe large amounts to China are closely watch­ing Sri Lanka’s example.

« strictly bilat­eral approach has made it more dif­fi­cult to co-ordin­ate the activ­it­ies of all major emer­gency lenders,» said Parks.

Sev­eral of the 22 coun­tries that China has made res­cue loans to — includ­ing Argen­tina, Belarus, Ecuador, Egypt, Laos, Mon­go­lia, Pakistan, Sur­i­n­ame, Sri Lanka, Tur­key, Ukraine and Venezuela — are also recip­i­ents of IMF sup­port.

Big recip­i­ents of BRI fin­an­cing, which rep­res­ent a sig­ni­fic­ant bal­ance sheet risk for Chinese banks, are more likely to receive emer­gency aid.

«Beijing is ulti­mately try­ing to res­cue its banks. That’s why it has got­ten into the risky busi­ness of inter­na­tional bail­out lend­ing,» said Car­men Rein­hart, a Har­vard Kennedy School pro­fessor and former chief eco­nom­ist at the World Bank Group.

China’s lend­ing comes in two forms. The first is through a «swap line» facil­ity, where ren­minbi is dis­bursed by the People’s Bank of China, the cent­ral bank, in return for domestic cur­rency. About $170bn was dis­bursed in this way. The second is via dir­ect bal­ance of pay­ments sup­port, with $70bn pledged, mostly from state-owned Chinese banks.

The BRI is the world’s largest-ever transna­tional infra­struc­ture pro­gramme. The Amer­ican Enter­prise Insti­tute, a US think-tank, has put the value of China-led infra­struc­ture projects and other trans­ac­tions clas­si­fied as «Belt and Road» at $838bn between 2013 and the end of 2021.

www.sba.tax

Labels:

Comments

Post a Comment

Cloud Bookkeeping

US FED rate rise.

  The US Federal Reserve officials have indicated that they plan to resume increasing interest rates to control inflation in the world's biggest economy. During the June meeting, the Federal Open Market Committee reached a consensus to keep interest rates stable for the time being to evaluate whether further tightening of policy would be necessary. However, the majority of the committee anticipates that additional rate increases will be required in the future. The minutes of the meeting have recently been made public. According to the minutes, most participants believed maintaining the federal funds rate at 5 to 5.25 per cent was appropriate or acceptable, despite some individuals wanting to raise the acceleration due to slow progress in cooling inflation. Although Fed forecasts predicted a mild recession starting later in the year, policymakers faced challenges in interpreting data that showed a tight job market and only slight improvements in inflation. Additionally, officials gr...
Post a Comment
Read more

EU business slide.

  S&P Global’s flash eurozone composite purchasing managers’ index, a key gauge of business conditions for the manufacturing and services sector, fell 1 point to 47.1, figures showed yesterday. That is its lowest level since November 2020 and the fourth consecutive month below the crucial 50 mark separating growth from contraction. One of the few bright spots in the survey was that companies in all sectors reported a slight easing of cost pressures, price growth and supply chain constraints. However, prices charged for goods and services still rose at the sixth fastest rate since such data started in 2002. Jobs growth increased marginally from October but remained low compared with the past 18 months. Following a few months of falling price pressure in manufacturing and services, the October print shows an overall stabilisation said Jens Eisenschmidt, chief European economist at Morgan Stanley. However, German businesses, at the hub of Europe’s energy crisis, reported that manu...
1 comment
Read more

Tariffs on UK electric cars.

  The European Commission has confirmed that it will continue with its plan to impose tariffs on electric cars exported between the UK and EU starting next year. This is due to the "rules of origin" requirement that mandates EVs traded across the English Channel to have 60% of their battery and 45% of their parts sourced from the EU or UK or face a 10% tariff. A senior Commission official, Richard Szostak, recently informed parliamentarians from the UK and EU that the bloc's battery investment has significantly declined, making the tariffs necessary to encourage domestic production. In 2022, the EU's share of global investment in battery production shrank from 41% to only 2% after the US offered substantial subsidies through its Inflation Reduction Act. Starting in 2024, car manufacturers in the UK will need to have 22% of their sales come from zero-emission vehicles, which means they may need to import EVs from the continent to meet this requirement. If EU carmakers ...
Post a Comment
Read more