![]() ![]() The Zambian experience shows that China’s lending strategy needs to change, says Harry Broadman, chair of the emerging markets practice at Berkeley Research Group LLC in Washington. After all, Chinese commercial lenders have their own metrics and economic incentives that would mitigate against restructure or forgiving foreign debts.” “While private Chinese lenders and the Chinese state are no doubt close, there may be limits to how far the state can go in telling the former what to do.The BRI is “a good deal more fragmented and chaotic than much Western media coverage makes out,” says Sebastien Strangio, author of a new book “In the Dragon’s Shadow”, which traces the extension of Chinese power into southeast Asia. Such recompense could come through measures back home in China, such as direct money transfers or preferential project stakes, he adds. It’s “very probable” that the Chinese government will ultimately have its commercial lenders publicly write off some debts or permit temporary forbearance, but then privately reimburse them, Collins says.But Beijing is unlikely to allow this because Zambia would see such a stance as “a hostile act that destroyed whatever strategic position China might have gained through the loans.” “Chinese lenders will ultimately acquiesce to Beijing’s demands but in the meantime will press their case as far as they think politically advisable in order to try and at least minimize the haircut that may be coming,” says Collins, a fellow at Rice University’s Baker Institute for Public Policy.Ĭhinese commercial lenders see a wealth of assets such as copper output which could be used to satisfy obligations, Collins says.“Such influence is, at best, temporarily rented and financial outlays that opened doors when times were good suddenly become liabilities when a macro shock leaves debtors unable to pay.” Loan diplomacy “often fails to purchase lasting strategic influence,” he says.The present situation illustrates some limits to China’s Belt and Road Initiative, says Gabriel Collins, co-founder of the China SignPost research group in the US. Zambia also has yet to devise a plan for $200 million of arrears to Beijing, he adds. ![]() Even if Zambia secures the full $225 million of debt service relief it has requested from what the G20 considers to be Chinese bilateral creditors, the state owes a further $158 million to Chinese non-official creditors, Branson says.Zambia is vulnerable to defaulting in the absence of confirmation from Beijing that it recognises China Exim Bank, which is funding the expansion of the Kenneth Kaunda International Airport, as an official creditor, says Nick Branson, director of Gondwana Risk in London.Zambia “hopes to formalize all debt service suspension agreements before the end of the year”, the statement said. In a separate statement to the London Stock Exchange (LSE) on October 7, the Zambian finance ministry said that the status of discussions for debt service deferment “varies across Chinese lenders.” the Republic with its limited fiscal space will be unable to make payments and, therefore, fail to forestall accumulating arrears.”ĭebts to Chinese commercial lenders are at the core of the problem. “Should Zambia fail to reach an agreement with its commercial creditors. ![]()
0 Comments
Leave a Reply. |