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Beijing [China]October 1 (ANI): China’s debt-trap policy has emerged, with many emerging economies’ loans struggling to repay due to financial distress and economic slowdown.
According to the Colombo Communiqué, world financial experts believe that China is learning the hard lesson of trying to dump funds to developing and least developed countries at high interest rates and face dubious penalties, including seizure of land without payment and property.
World Bank economists Sebastian Horn, Carmen Reinhardt and Christoph Trebesch estimate that nearly 60 percent of China’s overseas loans are currently held by countries considered financially distressed , compared with 5% in 2010.
The COVID-19 pandemic and the subsequent Russia-Ukraine conflict have adversely affected emerging economies. China could face more troubled loans as countries struggle to meet their debt obligations.
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Chinese Foreign Minister Wang Yi told African countries in August that Beijing would waive principal repayments on 23 interest-free loans due at the end of 2021.
According to the Wall Street Journal, “China has already spent $1 trillion to expand its influence in Asia, Africa and Latin America through its BRI program. Now, according to those involved in the policy, Beijing is taking a crack at the beleaguered initiative. Complete overhaul. – Manufacturing.”
Amid a slowing global economy, high inflation and weak efforts to emerge from a pandemic year, repaying Belt and Road loans is the least priority for lender countries.
“After nearly a decade of urging Chinese banks to lend generously, Chinese policymakers are discussing a more conservative plan, dubbed ‘Belt and Road 2.0’ in internal discussions, that will be more rigorously assessed,” the source said. new financing projects.
They are also open to accepting some loan losses and renegotiating debt, something they were previously reluctant to do,” the WSJ report added.
Western economists have repeatedly said China’s borrowing practices are unhealthy because they have contributed to debt crises in many countries, including Zambia and Sri Lanka.
As a result, “tens of billions of dollars in loans went bad and many development projects stalled,” according to the Colombo Gazette, which has been labelled “debt-trap diplomacy,” embarrassing Beijing.
The Wall Street Journal said that China has begun to work with other creditor countries to resolve the current debt quagmire, adding: “For this, Beijing has had to abandon its longstanding resistance to cooperation with international institutions such as the Paris Club. The United States, Japan and France . It is coordinating with members of the Group of 20 advanced and developing economies to negotiate debt relief for some countries.”
The report also said that because of these embarrassments, China was forced to change its attitude towards the Belt and Road Initiative, according to the Colombo Gazette.
Zhong Weifeng, a senior researcher who tracks the Chinese government, said: “Beijing has also played down its rhetoric in state media. While it used to tout China’s economic benefits of lending to recipient countries, it now emphasizes managing risks and improving international cooperation.” Advocacy for the Mercatus Center, a free-market think tank at George Mason University.
“China is trying to correct its course,” Zhong said.
During this period, China could choose to write off loans that forced Chinese banks to incur huge losses, which they were simply not willing to do, according to the Colombo Gazette.
“The fact that Chinese banks have significantly reduced lending to new projects in low-income countries as they focus on cleaning up their existing loan portfolios is evident,” said Sebastian Horn.
As a result, China has no choice but to extend the loan repayment period, relax the repayment period, remove the penalty clause, or if all else fails, extend the loan period indefinitely, according to the Colombo Communiqué. (ANI)
(This is an unedited and auto-generated story from the Syndicated News feed, the body of the content may not have been modified or edited by LatestLY staff)
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