China hands out at least twice as much development money as the US and other major powers, new evidence shows, with most of it coming in the form of risky high-interest loans from Chinese state banks.
The sheer amount of Chinese lending is startling. Not too long ago China received foreign aid, but now the tables have turned.
Over an 18-year period, China has granted or loaned money to 13,427 infrastructure projects worth $843bn across 165 countries, according to the AidData research lab at William & Mary, a university in the US state of Virginia.
Much of this money is linked to Chinese President Xi Jinping's ambitious Belt and Road strategy. Starting in 2013, it leverages China's expertise in infrastructure projects, and ample foreign currency, to build new global trading routes.
However, critics fear that
the high-interest loans funding many Chinese projects are saddling unsuspecting populations in sky-high debt.
And that's news even to Chinese officials themselves. The AidData researchers - who have spent four years tracing all of China's global lending and spending - say that Chinese government ministries are regularly going to them for information on how Chinese money is being used overseas.
"We hear from public officials in China all the time, saying 'Look, you're in the only game in town'," explains Brad Parks, executive director of AidData. "They say: 'We can't get our hands on this data internally'."
A twisting railway running between China and the neighbouring country of Laos is often touted as a prime example of China's off-the-books lending.
For decades, politicians wondered about building such a connection - linking landlocked south-west China directly to South East Asia.
However, engineers warned the cost would be prohibitive: tracks would need to run through steep mountains, requiring dozens of bridges and tunnels. Laos is one of the poorest countries in the region and couldn't afford even a fraction of the cost.
Enter China's ambitious bankers: with backing from a group of Chinese state companies and a consortium of Chinese state lenders, the $5.9bn railway is set to begin operations in December.
However,
Laos had to take out a $480m loan with a Chinese bank to fund its small part of the equity. One of Laos' few sources of profit, the proceeds of its potash mines, were used to back the massive loan.
"The loan that China's Eximbank made to cover part of the equity really showcases the urgency of the Chinese state to push through the project," explains Wanjing Kelly Chen, research assistant professor at the Hong Kong University of Science and Technology.
Most of the line is owned by the Chinese-dominated railway group, but under the murky terms of the deal, the Laotian government is ultimately responsible for the railway's debt. The imbalanced deal has led international creditors to downgrade Laos' credit rating to "junk" status.
In September 2020, on the brink of bankruptcy, Laos sold a major asset to China, handing over part of its energy grid for $600m in order to seek debt relief from Chinese creditors. And this is all before the railway has even begun operations.
The Laos railway is far from the only risky project that Chinese state banks have funded - and yet, AidData says China remains the financier of first resort for many low and middle income countries.