China is the largest borrower among all the world's low- and medium-income countries while also being one of the biggest lenders to those places, the World Bank said in a recent report, underscoring the nation's key position in the global economy, Nikkei Asia writes.
Almost 60%, or about $4 trillion, of financial flows to low- and middle-income countries from external creditors and investors went to China over the last decade, according to the November report. In 2020, loans and investments that made their way into China jumped 32% from a year earlier to $466 billion, even as such flows to low- and medium-income countries generally slowed. The balance of China's debts increased 11% to $2.3 trillion.
The World Bank said the greater flows into China were mainly driven by increased investment in yuan-denominated bonds through the country's interbank bond market, also known as CIBM, which has been relaxing restrictions on overseas investors since 2016.
Foreign investors held $635 billion of Chinese bonds by the end of 2020. CIBM is now worth $12 trillion, second only to its U.S. counterpart.
Meanwhile, low- and middle-income countries' combined debt to China was $170 billion at the end of 2020, more than triple the level in 2011. That makes China the largest lender to such nations, with much of the funding used for large infrastructure development projects, often in African nations like Angola. South Asia's debts to China have also climbed fast, growing to $36.3 billion in 2020 from $4.7 billion in 2011.
Investment and loans originating from China take various forms, but most come from government-affiliated institutions, including the Export-Import Bank of China, China Development Bank and the Agricultural Development Bank of China.
After the COVID-19 pandemic upended the global economy, nations such as Japan called on China to make sure its loans to developing countries are transparent. The international community is watching to see whether China, which has expanded rapidly using investment and loans from other countries as fuel, can lend responsibly to nurture economic growth in developing nations.
