The Chinese government has suspended the debt repayments owed to it by 77 developing countries, following the agreement of an international debt relief program by the Group of 20 nations (G20).
The move comes a month after China pledged $2bn (€1.7bn, £1.5bn) over two years to help countries cope with the blow inflicted by the Covid-19 crisis, along with a further $50m for the World Health Organisation (WHO).
In the past two decades Chinese international interest and investment abroad has accelerated significantly, investing heavily in Africa and throughout Eurasia.
In recent years China’s efforts have come under increased scrutiny. Critics in the West, Africa and India have labelled its infrastructure and investment projects a form of ‘dept-trap’ diplomacy.
In 2014 Djibouti received major investment from China and within two years its debt-to-GDP ratio surged from 50 to 85 per cent. Cambodia and Laos have become so indebted to the Chinese government, that Australia’s former Foreign Minister Gareth Evans described both nations as being “wholly owned subsidiaries of China.”
The most notable case of Chinese debt-diplomacy could be said to be Tonga, which accepted a Chinese loan in 2006. When the pacific island experienced a debt crisis in 2013, the Exim Bank of China, a bank subordinate to the State Council, did not forgive the loans owed to it. In total the loans represented 44 per cent of Tonga’s GDP.
Defenders of China have pointed to the considerable level of progress witnessed in some of the areas it invested in, such as Africa, which the International Monetary Fund (IMF) declared to be the second-fastest growing region in the world. Others have argued that Western states followed the exact same strategies in their historic campaigns to become global superpowers.
China’s decision to suspend debt repayments could therefore be seen as a genuine attempt to help smaller nations recover from the Covid-19 blow. Alternatively, it could be described as a self-interested attempt not to repeat the Tongan controversy on a mass scale, instead presenting itself as a global force for good in a post-coronavirus world.