China is now a bigger lender than the International Monetary fund, the World Bank and all members of the Paris club put together. China is seeing its first overseas debt crisis as so many of its overseas projects have failed. To countries such as Nigeria, Turkey, Ukraine, Pakistan, Sri Lanka, Argentina, Belarus, Egypt and Mongolia, China is now giving them rescue loans because of defaulting on Infrastructure projects. China is therefore providing rescue loans directly to recipient governments as it does not want those countries to go bust.
All this lending by China is part of its signature foreign policy called the belt and road initiative. There have been more than 13000 projects as part of this initiative mostly in the developing world. Some of the projects such as train projects in Africa and hydro dams has been delivered on time and are generating good returns. However, there are also many projects and increasing number of projects that are underperforming and have problems of corruption, problems of implementation and some are delayed and some have financing issues.
The bonds issued by the countries who take Chinese loans are placed in the market at the moment as highly risky. Since most of the deals done in the belt and road initiative are done in complete secrecy there aren’t environment and social impact studies conducted on a project by project basis.
This allows Chinese construction companies that build the infrastructure to deliver the project high speed. However the drawbacks happen when corners are cut and social and environment concerns come into public domain. However, there might be some kind of multilateral resolution that brings China and western led institutions together might be possible to recover the losses from projects in developing countries.