China has had to bail out the central banks of numerous foreign countries that have been unable to pay their debts from projects financed through Beijing’s Belt and Road Initiative. That’s according to a new report released last Thursday by the AidData research lab at the College of William & Mary.
The report says China has spent US$240 billion on rescue loan operations across 22 debtor countries from 2008 to 2022. In 2010, only 5% of China’s overseas lending was spent on bailouts, but that number ballooned to nearly 60% by 2022. China has primarily bailed out middle income countries, whose defaults would threaten the stability of Chinese banks.
China’s bailout loans have an average interest rate of 5%, more than double the standard 2% rate of loans from the International Monetary Fund. China’s loans are also much less transparent, making it difficult for outsiders to know the true financial condition of debtor countries.
The report comes as Taiwan’s government warns Honduras against falling into China’s debt trap. Just over a week ago, Honduras ended diplomatic relations with Taiwan in favor of China in hopes of receiving more financial assistance from Beijing.