China has spent $240 billion bailing out over 20 debtor countries since 2000, with $48.5 billion extended to Pakistan alone.
According to a report by researchers from the World Bank, Harvard Kennedy School, AidData, and the Kiel Institute for the World Economy, Chinese loans to debt-ridden countries increased from less than 5 percent of its overseas lending portfolio in 2010 to 60 percent by 2022.
Amongst the debtors, Argentina received the most with $111.8 billion, followed by Pakistan with $48.5 billion and Egypt with $15.6 billion. Meanwhile, nine countries received less than a billion dollars. These amounts increased in recent years as economies struggled to repay loans spent building “Belt & Road” infrastructure.
China has lent hundreds of billions of dollars to developing countries to build infrastructure, but lending has slowed since 2016 as many projects have failed to pay the expected financial dividends.
Pakistan (2013-2021), Egypt (2016-2021), and Turkey (2021), which made large drawdowns during the protracted balance of payments crises, as demonstrated by their crashing currencies in the face of dwindling foreign exchange reserves.
Pakistan is one of the most important participants in China’s Belt and Road Initiative. It faced principal and interest payments to Chinese creditors worth 10.2 billion USD between 2013 and 2021. In 2013, the State Bank of Pakistan (SBP) made its first drawdown from the swap line.
Since 2013, the SBP has repeatedly rolled over and increased its swap debt to the People’s Bank of China (PBOC) ($4.7 billion as of 2021), leading the International Monetary Fund to express concern about Pakistan’s strong reliance on short-term swap debt and its inadequate net reserve position.
Between 2013 and 2021, Pakistan also received $23 billion in additional liquidity support (including rollovers) from China’s State Administration of Foreign Exchange (SAFE), China Development Bank, Bank of China, and ICBC.
The study has criticized some central banks for potentially using PBOC swap lines to artificially boost their foreign exchange reserves. According to Brad Parks, one of the report’s authors and director of AidData, China’s rescue lending is “opaque and uncoordinated”.
Overall, the report notes that due to the risk they pose to Chinese banks’ balance sheets, bailout loans are primarily concentrated in middle-income countries, which account for four-fifths of their lending, while low-income countries are offered grace periods and maturity extensions.