Debt-trap diplomacy? Report finds China can cancel loans if displeased
- China’s contracts give lenders broad scope to cancel loans or accelerate repayments if debtors’ policies are deemed contrary to Chinese interests, researchers find
- Loans have become more secretive and usually prevent borrowers restructuring, according to ‘How China Lends’ report
Such actions include ending diplomatic relations with Beijing, while the loans typically involve an unusual degree of confidentiality and prohibit borrowers from restructuring, according to a study of 100 Chinese contracts signed between 2000 and 2020 with 24 countries, 47 of them involving public resources in Africa.
Titled “How China Lends” and published on Wednesday, the report was compiled by researchers from AidData, a lab at the College of William & Mary in the US, along with Washington-based think tanks the Centre for Global Development and the Peterson Institute for International Economics, and German think tank the Kiel Institute for the World Economy.
Some, including the previous US administration, have accused China of conducting “debt-trap diplomacy” and extracting economic or political concessions when countries cannot service loans. Beijing has repeatedly denied that accusation and said it takes a “no strings attached” approach to offering loans.