China's collateral demands curbing emerging countries' ability to manage finances, study shows

Study finds almost half of lending is secured with cash deposits. Practice curbs borrower nations' ability to create fiscal space. ... It also complicates debt restructuring processes in defaults. IMF, World Bank expressed concerns in 2023. ...

China has lent hundreds of billions of dollars for infrastructure and projects in developing countries, but has been criticised for using earnings of commodity exports from borrower nations as security for the loans, sometimes arranged during times of economic strife for the borrower. ... China's total public and publicly guaranteed lending to low and middle-income countries totals $911 billion, said the report by AidData, the Kiel Institute for the World Economy and Georgetown University, together with other partners. ... "As security, Chinese lenders strongly prefer liquid assets - in particular, cash deposits in bank accounts located in China. They also want visibility and control over revenue," said Christoph Trebesch of the Kiel Institute. ... "Our research reveals a previously undocumented pattern of revenue ring-fencing where a significant share of commodity export receipts never reach the exporting countries," said Brad Parks, executive director of the AidData research lab. ...

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