Chinese lenders turn off the taps on international energy projects as ‘debt trap diplomacy’ criticisms mount
- Loans from two development banks fell by 71pc last year to US$3.2bn with three projects in Guinea, Nigeria and Turkey the only ones to benefit
- Concern is growing both in China and abroad about the sustainability of its lending practices
Funding for energy projects from two of China’s biggest policy banks dropped to the lowest level in more than a decade last year amid growing criticism of its “debt trap diplomacy”, according to a new report.
China Development Bank and the Exim Bank of China only advanced loans for three projects worth US$3.2 billion last year – the biggest drop since 2008, research by Boston University’s Global China Initiative found.
This marked a 71 per cent drop from the US$11 billion advanced in 2018, and came amid a general reduction of Beijing’s lending to foreign countries and growing concerns that it is burdening poorer countries with unsustainable debts.
The devastating effects of Covid-19, which has killed more than 2,000 people, and the effects of the prolonged US-China trade war will only worsen the situation in an economy already witnessing a deceleration in growth in recent years, the researchers said.
Kevin Gallagher, director of the centre that compiled the report, said the lenders were becoming concerned about the debt sustainability of recipient countries. They were also facing growing opposition from politicians and civil society in these countries over their cost and environmental impact.
