China has drastically curtailed the overseas lending program of its two largest policy banks, after nearly a decade of ambitious growth which at its peak rivaled that of the World Bank, new research indicates, reported the Financial Times.
Lending by the China Development Bank and the Export-Import Bank of China collapsed from a peak of $75 billion in 2016 to just $4 billion last year, according to data compiled by researchers at Boston University and seen by the FT.
The sharp retrenchment comes as Beijing rethinks its Belt and Road Initiative, the signature scheme of China’s leader Xi Jinping that finances and builds roads, railways, ports and other infrastructure in mostly developing countries.
According to a recent report by the Overseas Development Institute, a think-tank, Beijing is now realizing that its approach to lending is unsustainable. “The old . . . model, whereby the interests of Chinese companies and local elites take precedence over the good of the borrowing country, which bears a disproportionate amount of the project failure risk, will become even more unsustainable amid countries’ reduced capacity to take on debt and risk,” the ODI report said.