Loan talks with Belarus; funding for bridges in Liberia; a possible gas project in Timor-Leste; accusations of exploitation in Tanzania; a corporate dispute in India; pledges to support the Rwandan private sector. And that was just the past few weeks. Such is the frenetic pace of China’s overseas lending that its outstanding loans have risen from almost nothing in 2000 to more than $700bn today. It is the world’s largest official creditor, more than twice as big as the World Bank and IMF combined. Yet tracking the money is hard because of limited transparency in its disclosures.
A new study by Sebastian Horn and Christoph Trebesch of the Kiel Institute for the World Economy and Carmen Reinhart of Harvard University offers the most comprehensive picture yet of China’s official credit flows (including state-owned banks). It adds to concern about whether China has sowed the seeds for debt problems abroad. They find that nearly half of China’s lending to developing countries is “hidden”, in that neither the World Bank nor the IMF has data on it.
Ken Griffin is still swooping on trophy properties. investors are bidding up the value of private assets to unimaginable levels but that has been less successful recently following the WeWork haircut and dismal performance of Uber and Lyft. Classic car auctions were hitting all-time highs earlier this year but the latest total for the Monterey auctions was down 34% on last year.
China, through its Belt and Road program, has made a geopolitical decision to try and tie frontier economies to its sphere of influence. $700 billion is a significant sum but what is more difficult to figure out is in what currency the loans were issued.
The rationale of attempting to secure cashflows in emerging economies with the kind of growth potential it used to have makes sense from China’s perspective. The capacity for repayment is an inhibiting factor but is also another example of the desire for yield pushing all investors into either hard assets like property, art and cars or into higher yields like junk bonds.
All of these kinds of investments look inspired as long as prices are rising and economies expanding. The illiquidity of these assets represents a heavy yolk around returns in a falling market. That is particularly relevant for China since many of the countries it has lent to are dependent on exports to China for their ability to pay back the loans. That suggests it is doubly levered to its domestic growth rate.Back to top