SECRET DEALS ASSURE CHINA OF PROMPT LOAN PAYMENTS IN AFRICA

Experts are miffed by the underhanded tactics of China in cutting loan agreements with impoverished African nations, assuring that Beijing will be the preferred lender, a primus inter pares, who must be paid even in case of default.

Carlos Mureithi, East Africa correspondent for Quartz Africa, reported that secret contracts show how China structures loans to become Africa’s “preferred” lender, meaning it will be exempt from the treatment of multilateral lenders like the Paris Club.

Mureithi noted that a report from the AidData, a US-based development finance research lab, revealed how Chinese lenders use contracts to gain an advantage over other creditors in developing countries, limiting the borrowers’ options for crisis management and complicating debt renegotiation.

Researchers examined 100 contracts issued 2000 and 2020 between Chinese lenders and 24 developing countries, including 11 from Africa, worth $36.6 billion. Lenders included the China Development Bank, the Export-Import Bank of China and state-owned commercial banks.

They found that the contracts frequently contained provisions that position Chinese state-owned banks as “preferred creditors,” whose loans should be repaid on a priority basis. One of the most contentious findings of the report is that almost three-quarters of the contracts contained “no Paris Club” clauses.

These effectively “committed the borrowing countries to exclude the debt from restructuring in the Paris Club of bilateral creditors and from any comparable debt.”

China is not a member of the Paris Club, an informal group of 22 creditor nations to coordinate payment terms.

But last year it signed up to a G20 debt suspension initiative requiring governments to coordinate debt relief terms for countries that use Paris Club conventions.

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