66% of the world’s debt is in the hands of China, which has become the world’s largest bilateral creditor in recent years, with Chinese companies also becoming creditors. However, as World Bank President David Malpas recalled yesterday, global debt is constantly increasing, especially the debt of the poorest countries, and unlike other international creditors, China is constantly unwilling to participate in any international agreement to reduce its debt. .

According to the latest data released recently by the World Bank, the external debt of low- and middle-income countries increased by an average of 6.9% last year, reaching $9.3 trillion. In short, there was more growth in 2021 than the 5.3% growth seen in 2020, the terrible year of the first wave of the pandemic. Mr. Malpas stressed that the relevant World Bank report clearly states that “reductions in the debt of poor countries should be widespread and include the private sector and China.” He even invited G20 leaders to consider the issue at their meeting starting today in Bali, Indonesia. “They recognize the seriousness of the problem,” Mr. Malpas stressed, but added that so far there has been little progress in his efforts to immediately “freeze” the debt payments of countries that have requested debt relief and speed up the debt restructuring process.

IMF and World Bank officials estimate that 25% of emerging market and developing countries are on the brink of bankruptcy. This percentage even jumps to 60% when it comes to middle-income countries. The devastating effects of climate change have affected some poor countries and, combined with rising interest rates, are making it difficult to pay off their debt. In doing so, they push the pressure to the limit on economies that are still struggling to recover from the pandemic recession. And, as the head of the World Bank pointed out, China is reluctant to participate in this process, which is moving very slowly and “essentially remains an observer.” In August, Beijing wrote off about 0.3% of its loans to African countries, but those were 20-year loans that were long past due and never expected to get their money back.

Other observers accuse the world’s second-largest economy of trapping poor countries by lending them large sums of money for infrastructure projects, but on terms that serve its own interests and are often burdensome for borrowers. Pakistan’s total debt, for example, has more than doubled in the last decade as its borrowing from China soared. But recently, as it struggled to cope with devastating floods, it was forced to prioritize payments on a loan it owed to China.

China owns 66% of the world’s debt.

Over the past decade, many developing countries have asked China to lend them the capital they need to build high-speed trains, hydroelectric dams, airports and major highways. Now that inflation is accelerating, interest rates are rising and the economy is weakening, many of these countries are at the mercy of Beijing.

Many of them are in dire financial straits due to the effects of the pandemic, the energy crisis and inflation driving up food prices. China’s loans to poor countries are provided at a floating interest rate, much higher than that of Western governments. Now that interest rates are rising, loan repayments are rising just at the moment when these poor countries are experiencing the most hardship. And their currencies have depreciated against the dollar, but almost all of their loans have to be repaid in dollars. As a result, China’s red loans to developing countries now stand at $118 billion, most of which are for infrastructure projects along the new Silk Road. And finally, China gives them new loans.