PARIS – Emerging economies will have to find fresh sources of funds as China reduces investments and loans, said a study by French insurance-credit group Euler Hermes this week.
The company expects China “to slow its international engagement over the next few years”, according to a report released on Tuesday.
This is because as Chinese economic growth slows, Beijing must also deal with “a heavy domestic debt burden”, said the report.
Euler Hermes estimated that 10 emerging-market countries in Africa and Latin America that have received substantial Chinese aid since 2010 will face a combined deficit of US$47 billion (RM194.25 billion).
In recent years, China has been the world’s leading creditor to poorer countries, accounting for 63% of all such loans extended by G20 countries at the end of 2019, said the World Bank last month.
Countries including Ethiopia, Kenya and Zambia have improved economic infrastructure thanks to Chinese financing that is part of the strategic Belt and Road Initiative, said Euler Hermes.
But, Beijing has also lent money to countries that might not be able to pay it back, such as Angola, Argentina and Ecuador, which offered guarantees in the form of natural resources that could prove hard to recover if they default on their loans.
Euler Hermes’ data showed that Ethiopia and Zambia, in particular, relied on Chinese funding, as it represented 49% and 45%, respectively, of all loans contracted abroad.
For Kenya, the rate was 37%, and Angola, 30%.
Angola has large hydrocarbon reserves, and a little more than two-thirds (67.6%) of its exports last year were to China. – AFP, November 12, 2020
