China has fueled an unprecedented surge in official lending over the past 15 years. The most remarkable feature of this wave of credit, however, is not its size, but its dangerous lack of transparency.
CAMBRIDGE – Over the past 15 years, China has fueled one of the most dramatic and geographically far-reaching surges in official peacetime lending in history. More than one hundred predominantly low-income countries have taken out Chinese loans to finance infrastructure projects, expand their productive capacity in mining or other primary commodities, or support government spending in general.
But the size of this lending wave is not its most distinctive feature. What is truly remarkable is how little anyone other than the immediate players – the Chinese government and development agencies that do the lending and the governments and state-owned enterprises that do the borrowing – knows about it. There is some information about the size and timing of Chinese loans from the financial press and a variety of private and academic sources; but information about loans’ terms and conditions is scarce to nonexistent.
Three years ago, writing about “hidden debts” to China and focusing on the largest borrowers in Latin America (Venezuela and Ecuador), I noted with concern that standard data sources do not capture the marked expansion of China’s financial transactions with the remainder of the developing world. Not much has changed since then. While China in 2016 joined the ranks of countries reporting to the Bank for International Settlements, the lending from development banks in China is not broken down by counterparty in the BIS data. Emerging-market borrowing from China is seldom in the form of securities issued in international capital markets, so it also does not appear in databases at the World Bank and elsewhere.
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