Chronic. American and German researchers have just got their hands on a treasure. They unearthed, in the depths of the Internet and public administration archives, a hundred loan agreements signed between China and twenty-four low-income countries, between 2000 and 2020, for a total of 36.6 billion of dollars (31 billion euros). These documents are worth gold because not much is known about the borrowing conditions demanded by the world’s largest creditor country, which have been the subject of numerous studies, or rather, it must be admitted, many speculations.
Some argue that the Chinese debt is a trap intended to obtain geostrategic concessions in bankrupt countries, others that it gives oxygen to poor countries deserted by creditors. The report produced by four research centers, including the AidData laboratory of the American college William & Mary, the Center for Global Development and the Peterson Institute for International Economics, both based in Washington, and the Kiel Institute for the World Economy in Germany , should feed into discussions between G20 member countries. They are meeting precisely this week to address in particular the issue of the debt of poor countries, which has dangerously increased since the start of the economic crisis linked to the Covid-19 pandemic.
Not only should the loan conditions be kept confidential, but also the loan amounts.
According to the report entitled “How China Lends” and released at the end of March, Chinese creditors are drafting confidentiality clauses that far exceed the requirements generally formulated by creditor countries or development banks. Not only the loan terms must be kept confidential, but the loan amounts as well. This confidentiality poses serious problems of transparency, since governments must hide from their taxpayers the sums that they will have to reimburse sooner or later. This opacity also complicates collective debt restructuring procedures. How can creditors in a country on the brink of default assess its creditworthiness or repayment capacity if some of the information is missing?
Unusual requests
Sheltered from the eyes of other creditors, Beijing is making other unusual demands. Three quarters of their contracts thus include a clause opting out of debt restructuring carried out by the Paris Club. However, this club of great creditor nations had patiently developed, over the years, a set of rules to coordinate debt restructuring or cancellation plans, one of which consists of not favoring a creditor rather than another. China has dynamited this principle of equity, which allows it to require its debtors to be reimbursed as a priority in the event of a problem.
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