China has been lending a lot more in international markets than official numbers record. New estimates suggest that China’s lending to the rest of the world reached $5tn in 2018, a tenfold increase from the early 2000s. The loans are often issued from Chinese banks to Chinese contractors overseas, which are not captured by IMF data on national debt statistics. Much of the lending appears to favour crisis-hit emerging economies, such as Venezuela, Zimbabwe, and Iran. This could be in an attempt to exercise ‘debt-trap diplomacy’. Overall, emerging market countries owe $380bn to China, compared to only $246bn to the Paris club of 22 Western countries.
Why does this matter? China’s international influence through lending may be larger than initially thought. This will raise Western concerns around debt-trap diplomacy lending, but also limits Western efforts to sanction countries like Iran and Venezuela.
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