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Source: The post is based on the article “China must take a haircut on its loans to poor countries, says India’s G20 Sherpa” published in The Hindu on 16th February 2023.
What is the News?
India’s G20 Sherpa has said that China must agree to take a haircut on its loans to poor countries and assist their economic recovery.
How much do low-income countries owe to China?
China is lending to most of the countries under the Belt and Road Initiative.
The world’s low-income countries owe 37% of their debts to China in 2022, compared to just 24% in bilateral debts to the rest of the world.
Those with the highest external debt to China are Pakistan, Angola, Ethiopia, Kenya and Sri Lanka.
Why has the US criticized China’s lending policy?
The US sees China’s lending practices as debt-trap diplomacy.
Debt-trap diplomacy is when a richer country lends to poorer countries – that are resource-rich or strategically placed – overwhelming them with debts that are not sustainable. This leads the poorer countries to give up their strategic assets or give in to political leverage.
However, China has rejected this criticism and calls it “propaganda/narrative of the vested interested countries” to tarnish its image.
