BRI investments falter in PRC's first overseas debt crisis, WH worries Pelosi's Taiwan visit will spark China crisis & Drew Pavlou arrested in UK over PRC embassy bomb threat --China Boss News 7.25.22
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Xi's BRI investments falter in China's "first overseas debt crisis"
“The Belt and Road Initiative has seen a surge in loans going bad, prompting Beijing to issue countries with emergency credit,” James Kynge, Kathrin Hille, Ben Parkin and Jonathan Wheatley of the Financial Times reported. “The cumulative impact of the multiple renegotiations that Beijing currently faces amount to the country’s first overseas debt crisis,” they said.
FT:
According to data collected by Rhodium Group, a New York-based research group, the total value of loans from Chinese institutions that had to be renegotiated in 2020 and 2021 surged to $52bn. This was more than three times the $16bn of the previous two years.
This sharp deterioration brings the total of Chinese overseas loans to have come under renegotiation since 2001 to $118bn — or about 16 per cent of the total extended, Rhodium estimates.
The most dramatic example of a BRI country in urgent need of debt restructuring is Sri Lanka which is experiencing a financial crisis that has resulted in “[p]rolonged disrupted access to food and healthcare,” according to UN human rights experts. Sri Lanka defaulted on its sovereign debt last May, and President Gotabaya Rajapaksa fled the country earlier this month to escape political unrest, US Institute of Peace reported.
Although “China is not the main cause of Sri Lanka’s crisis,” the country “won’t be able to resolve its debt restructuring problems without [Beijing’s] help,” says Umesh Moramudali, a lecturer at the University of Colombo who was interviewed by CNBC.
CNBC:
“You can’t get out of this crisis without China,” Moramudali, told CNBC’s “Streets Signs Asia” on Tuesday. “China needs to agree to restructure its debt, which is not their usual path to take.”
Other countries are attempting to mitigate worsening economic conditions by canceling or exposing bad BRI business deals that failed to bolster local businesses and create jobs. In the Philippines, newly elected Ferdinand Marcos Jr's administration "has effectively canceled three major railway projects with Chinese counterparts initiated under the previous Rodrigo Duterte administration,” Asia Times said, and Reuters recently reported that “Kenyan deputy president and presidential aspirant William Ruto said he will publish government contracts with China and deport Chinese nationals working illegally if he is elected on August 9.”
Experts say an increasing number of countries are likely to follow the Philippines’ and Kenya’s lead as the already vulnerable developing world wobbles under the extra weight of the coronavirus pandemic. Rhodium Group’s Matthew Mingey told FT that it’s currently “the worst period of debt pressure since the start of the Belt and Road Initiative,” and that “[t]he Covid-19 pandemic took existing problems and supercharged them.”
For the rest of FT’s report, China reckons with its first overseas debt crisis, click here. For the UN’s update on Sri Lanka’s economic and humanitarian crisis, Sri Lanka economic crisis requires ‘immediate global attention’: Rights experts, click here.
For U.S. Peace’s Institute’s explainer on how Sri Lanka’s sovereign debt spiraled out of control, Five Things to Know about Sri Lanka’s Crisis, click here. For Asia Times’ update on Marcos’ cancellation of BRI loans, In a reset, Marcos scraps Duterte’s China loans, click here, and for Reuters report on how Kenya may address its outstanding Chinese debts if Ruto wins the election, Kenya presidential hopeful Ruto promises to publish contracts with China, click here.
*For additional reading, check out Peter Coy’s New York Times op-ed, China Is Playing Hardball with Troubled Debtors. That’s Dangerous for All of Us.
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