China modifies its lending strategy to Africa and Latin America

The leaders of China and Peru in front of the presidential palace in Lima
Lima, Nov. 21, 2016: Chinese President Xi Jinping (L) and Peruvian President Pedro Pablo Kuczynski, who wants China to bankroll mining and infrastructure projects (source: dpa)
  • China’s domestic economic needs have been the primary factor behind its massive, easy-terms loans to the global south
  • While Beijing attaches some political and economic strings to its foreign loans, it is happy to cooperate with stable governments of all political colors, including regimes not palatable to Western nations
  • In an economic slowdown, China will tighten its loans, focusing on export markets and specific energy and transport projects

China has invested heavily in underdeveloped countries over the past decade. Since 2007, it has loaned more than $125 billion to Latin America and over $100 billion to various African states. Economic and political imperatives have driven this expansion, but serious economic headwinds within China and inevitable disagreements with recipient countries have necessitated a modification of Beijing’s loan strategy. The era of extravagant Chinese largesse is over. However, a more focused investment strategy in these regions will continue to be an important feature of Chinese foreign policy.

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