China's lending to other countries, often shrouded in secrecy, is thought to be higher than the amounts that are officially tracked, resulting in much 'hidden debt.' That could spark a worse-than-expected slowdown, among other problems, experts warn.
, she said. That effort includes analyzing countries' debt burdens, and coming up with recommendations for a borrowing strategy that limits the risk of debt distress.
Reinhart told the conference that, since 2011, there had been many such loans those countries took from Chinese lenders which needed to be restructured, or renegotiated. Such nations include Sri Lanka,Official debt statistics are tracked by the International Monetary Fund and the World Bank, but that only captures about half the Chinese loans to other countries, Reinhart estimated., which also tracks official lending, and is "not interested" in joining, said Reinhart.
"In short, debt transparency is essential for economic development. So when debts are 'hidden,' that's a problem for everyone — not just the World Bank or the IMF. It's especially a problem for the citizens of countries whose hidden debt is suddenly discovered, since uncertainty can lead to higher funding costs or, in the worst case, cut them off from funding," the World Bank statement said.
China has been criticized for saddling many countries with debt through its Belt and Road Initiative — a mammoth infrastructure investment plan to build rail, road, sea and other routes stretching from China to Central Asia, Africa and Europe. But Yu cautioned that the lack of transparency surrounding the loans meant that there is also uncertainty around how sustainable the projects are.
"History has taught us that, if not managed carefully, infrastructure investments can lead to a problematic increase in debt," she said.With risks increasing — whether associated with China's slowing economy or the Belt and Road project — Chinese loans to other countries could slow going forward.
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