© Reuters. A person stands in front of a sign of the Third Belt and Road Forum ahead of its opening ceremony, near the media centre in Beijing, China, October 18, 2023. REUTERS/Tingshu Wang/File Photo
Overseas finance has won Beijing allies across the developing world, while drawing criticism from the West and in some recipient countries, including Sri Lanka and Zambia, that infrastructure projects it funded saddled them with debt they were unable to repay.In 2013, when President Xi Jinping launched the Belt and Road Initiative to build infrastructure across the developing world, China's policy banks accounted for over half of the lending.
One way China is managing repayment risk is through foreign currency cash escrow accounts it controls, AidData said. The arrangement is controversial because it gives China debt seniority, meaning other lenders, including multilateral development banks, could get paid second during any coordinated debt relief.
China is also working more with multilateral lenders and Western commercial banks. Half of its non-emergency lending in 2021 was syndicated loans, 80% of that alongside Western banks and international financial institutions.
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