The Chinese way

By Lena Deros – The Chinese as people have proven to be very creative and have given the world many things that we use today, including silk, gunpowder, porcelain, and other more specialized items were initially produced in China.

There is also a rumor in some theoretical historical and political analyses that the Chinese have never tried to conquer or take over other nations as other countries have done in the past.

But how true is that theory?

Our research, based on a comprehensive new data set, shows that China has extended many more loans to developing countries than previously known. This systematic underreporting of Chinese loans has created a “hidden debt” problem – meaning that debtor countries and international institutions alike have an incomplete picture on how much countries around the world owe to China and under which conditions.

In total, the Chinese state and its subsidiaries have lent about $1.5 trillion in direct loans and trade credits to more than 150 countries around the globe. This has turned China into the world’s largest official creditor — surpassing traditional, official lenders such as the World Bank, the IMF, or all OECD creditor governments combined.

Despite the large size of China’s overseas lending boom, no official data exists on the resulting debt flows and stocks. China does not report on its international lending and Chinese loans literally fall through the cracks of traditional data-gathering institutions.

Credit rating agencies, such as Moody’s or Standard & Poor’s, or data providers, such as Bloomberg, focus on private creditors, but China’s lending is sponsored by the Communist Party, and therefore off their radar. Debtor countries themselves often do not collect data on debt owed by state-owned companies, which are the main recipients of Chinese loans. In addition, China is not a member of the Paris Club (an informal group of creditor nations) or the OECD, both of which collect data on lending by official creditors. more>

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