[ad_1]
China has probably lent more to emerging markets and developing countries in recent years than all Western-supported development finance institutions combined. The two principal vehicles for its investment, the China Development Bank and the Export-Import Bank of China, have been faulted for their opacity and high interest rates. Critics accuse these banks of luring low-income countries into taking loans for unsustainable infrastructure projects that China is then able to seize when repayment proves impossible. The Chinese government has also controversially claimed, in the context of debt restructuring negotiations, that these institutions should be treated as commercial entities rather than as organs of its state. Other countries, including the United States, similarly established policy banks earlier in their histories, but China’s policy banks are distinctive in seeking to simultaneously advance public policy goals and make a profit. Conflicts arise from these mixed motives, which include underwriting infrastructure investment and financing Chinese exports but also advancing Beijing’s geopolitical interests. According to Chen, China can reduce this tension by more clearly distinguishing policy and commercial lending, including by establishing separate financial accounts for the two activities.
Loading…
[ad_2]
Source link