China, a top lender, still receives billions in aid

China has become the world’s largest official creditor, particularly for low- and middle-income nations. But data showed the country is also a top recipient of aid.

By Cherry Salazar

The U.S. and multilateral banks, such as World Bank and the International Monetary Fund, have for decades been the world’s primary development financiers, providing emergency loans to countries in financial distress.

But a study released in 2023 showed that China is catching up as a new heavyweight in the global debt market — particularly through its massive Belt and Road Initiative, an infrastructure plan to develop trade routes connecting China with the rest of the world.

For years, China’s bilateral loans have raised concerns of pushing poor borrower countries into further economic stability and “debt trap diplomacy.”

Analysts warned that China’s financial assistance often comes with strings attached.

Laos, the only landlocked country in Southeast Asia, has been struggling with a very high debt burden and default risk.

In 2022, Laos’ debt is valued at USD 14.5 billion, about half of which is owed to China. The country planned to become the region’s “battery,” and is building about 80 hydropower dams along the Mekong River.

But revenues have yet to flow. Laos’ debt in 2023 already reached 108% of their gross domestic product.

China’s aggressive lending strategy, however, is just one part of the global picture.

Aid Atlas data showed that the total development finance in the world amounted to USD 1.56 trillion between 2016 and 2021.

Commitments targeting climate adaptation and mitigation took the biggest share of global aid.

This is followed by commitments to environmental projects, USD 111 billion.

Other identified global objectives, such as gender equality, disaster risk reduction, and nutrition, each received less than USD 100 billion.

Bilateral government aid to developing countries amounted to USD 1.45 billion.

Germany led the way with a commitment of USD 22.64 billion, followed by USD 19.37 billion and Japan with USD 5.56 billion.

Loans and grants from multilateral banks — such as the International Bank for Reconstruction and Development, Asian Development Bank, European Investment Bank, among others — yielded USD 11.34 billion.

Other funding sources, such as equity investments, accounted for USD 300 million.

Of the available development aid for climate change commitments, China received 6% or USD 21 billion.

The country received the second largest share, next to India.

Visually, China’s share from development aid for climate change projects may seem insignificant. However, when compared with those received by other developing countries, it becomes more substantial.

Despite its status as a top lender globally, the financial support China receives as a developing country still plays a crucial role in its development and underscores the complex dynamics of international aid distribution.