Belt and Road: Chinese loan renegotiations study challenges "debt-trap" narrative

China reportedly renegotiated $50bn in loans made to developing countries over the last decade, according to a study challenging the “debt-trap” narrative against the Belt and Road initiative from western countries.

The study from the Rhodium Group consultancy that examined 38 Chinese debt renegotiations with 24 different countries over the past 10 years revealed that outright asset seizure had only occurred in the case of Sri Lanka’s Hambantota port in 2017.

“The finding that deferments, refinancing, and new terms are much more common than asset seizures is a good illustration of the limitations of the debt-trap narrative,” said Agatha Kratz, one of the authors of the report.

The renegotiations of loans included term extensions, refinancing and debt forgiveness as the most frequent outcomes. Many of these resolved in favour of the borrower.

Debt write-offs were found in 14 cases, deferments in 11 cases, and refinancing and debt term changes accounting for most other cases.

US officials recently warned western countries that China is strategically using overseas financing to gain assets from developing countries and build the Belt and Road initiative to its own advantage while leaving developing countries with large debts.

President Xi Jinping said last week that China had signed $64bn in new deals to complete the Belt and Road scheme which seeks to build a modern version of the Silk Road to link China with Asia, Europe and beyond through large-scale infrastructure projects.