A better picture of China’s global lending spree

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As one of the world’s most prolific lenders, China has paid more than a trillion dollars in loans to the developing world for roads in Africa, ports in South America and railroads in Central Asia.

But the largest recipient of its financing over the past two decades has been the United States, where Chinese banks have provided $200 billion in financing for American companies and projects, according to AdData, a William & Mary research firm in Williamsburg, VA.

That money went into building pipelines, data centers and airport terminals, and helped grease the wheels of corporate financing for American companies like Tesla, Amazon, Disney and Boeing. By 2017, some of that funding began raising alarms in Washington, the NYT report said.

Chinese state-owned firms have provided $2.2 trillion in loans and grants worldwide since 2000, according to Brad Parks, lead author of a report released Tuesday by AdData, based on information from more than 30,000 projects in more than 100 countries.

Covering the period from 2000 to 2023, the study provides a complete picture of China’s position as an international creditor. It outlines how Beijing has used its financial resources to position itself in strategic sectors and establish potential supply chain watchdogs. It touches on deals that continue to raise concerns in the West, such as the acquisition of Nexteria, a company recently pushed in the middle of a geopolitical battle for control of semiconductor supply chains.

According to the NYT, most of China’s financing in the developing world has been loans to governments for major projects, but it has increasingly shifted to emergency loans as borrowing countries have fallen deeper into debt. In the developed world, Beijing’s focus has been more commercial. EdData’s figures do not include China’s acquisition of $730 billion in US Treasury securities.

Since 2000, China has become a financial powerhouse, with deep pockets, state-owned financial institutions and policy banks with a mandate to fulfill Beijing’s political ambitions. Its overseas borrowing has accelerated since 2013 under its supreme leader, Xi Jinping, who used China’s coffers to pump more than $1 trillion in loans for infrastructure projects in developing countries through his Belt and Road Initiative.

This sprawling program gave Beijing leverage in parts of the world that Western powers had neglected. The program has been criticized for creating unsustainable levels of debt and for directing contracts to China’s own companies, which have, at times, resulted in troubled projects.

More recently, China has rolled back its debt to poor countries, while extending more credit to wealthy ones like Australia and Britain. It now lends as much to high-income countries as it does to the developing world—$1 trillion, according to AdData.

China’s loans to developed countries are usually lines of credit to governments and large companies. Lenders are often state-owned enterprises, such as the Bank of China and the Agricultural Bank of China. Some of them are publicly listed and among the world’s largest banks, but many experts regard them strictly because they are sometimes required to fulfill policy mandates of the Chinese Communist Party.

Their financing is flowing into sectors that, he warns, could give Beijing an economic grip on strategic commodity reserves, supply chains and maritime crossroads, such as critical minerals, infrastructure and sensitive technologies such as semiconductors.

“These bankers lend to profitable projects, but they are also often forced to heed the dictates of the Communist Party,” said Andrew Koller, a senior fellow at the Harvard Kennedy School and former president of Bank of China International in the US.

“The chairmen of the four largest state-owned banks are all players at the poker table at the highest levels of government in China,” Koller said.

According to AdData research, Chinese state-owned lenders extended more than $335 billion in credit for mergers and acquisitions in dozens of countries, and three-quarters of the funds went to Chinese buyers in fields including robotics, biotechnology and quantum information.

Some of these deals have expired. In 2019, Chinese company Wingtech Technology acquired a controlling stake in Nexteria, a chipmaker headquartered in the Netherlands. Earlier this year, the Dutch government took control of the consortium after Washington introduced regulations that imposed tighter controls on its operations because its Chinese owner was on a sanctions list.

In the US, the financing activities of Chinese entities range from day-to-day trade financing for companies to bankrolling construction projects for liquefied natural gas and gas pipelines. These include the financing of some highly scrutinized acquisitions by Chinese companies with close ties to the government.

An attempt by an investor with ties to Beijing to buy Oregon-based Lattice Semiconductor Corp. was blocked by US President Trump during his first term. Shortly thereafter, Congress strengthened its assessment of Chinese investment. It has since become significantly more difficult for China to finance acquisitions in sensitive sectors in the US.