Overseas lending by China’s development banks continued its downward slide in 2021, according to a new study by the Boston University Global Development Policy Center.

In 2021, China’s development banks — the China Development Bank (CDB) and the China Ex-Im Bank (CHEXIM) — made only $3.7 billion in new loan commitments. That’s nearly 96 percent lower than the peak of $87 billion in 2016.

Chinese overseas developing lending commitments have fallen for five consecutive years since 2016 — with a corresponding decline in Belt and Road Initiative-related spending. (Not all Chinese overseas development financing falls under the Belt and Road Initiative.)

What's Driving the Fall In Chinese Development Financing?

China's massive current account surplus helped drive the exuberant wave of overseas development financing from 2008 to 2016. The Belt and Road Initiative, launched in 2013, was declared a signature project of Chinese leader Xi Jinping. China's state machinery went into overdrive to push forward the supreme leader's directive. From 2014 to 2016, China's development banks actually surpassed the World Bank in lending commitments, according to the Global Development Policy Center.


But China's current account surplus began a staggered decline after peaking at $420 billion in 2008, falling into a deficit in 2018, as domestic consumption and outbound tourism surged. As a result, Beijing directed greater funds toward domestic stimulus instead. At the same time, the unsustainability of many overseas infrastructure projects became clear and Chinese banks became more risk-averse in lending.

China's current account surplus has since rebounded, which the Global Development Policy Center notes could make China's development banks more willing to lend overseas. But the strong dollar has triggered an emerging markets debt crisis, with many of China's overseas borrowers likely to seek debt restructuring, if they have not already.

There is a renewed push for expensive projects like the China-Nepal railway and Pakistan's ML-1 rail line, but they are unlikely to move forward any time soon. The days of exuberant Chinese official lending overseas remain very much in the past.

Who is China Lending To?

Between 2008 and 2021, the CDB and CHEXIM made nearly $500 billion in loan commitments. Just under 60 percent of those loan commitments were made to 10 countries: Angola, Argentina, Bangladesh, Brazil, Ecuador, Iran, Kazakhstan, Pakistan, Russia, and Venezuela. Most of these countries are resource-rich, reflecting the focus of Chinese development banks pre-Belt and Road on energy-related projects.

With the launch of the Belt and Road Initiative in 2013, the composition of Chinese overseas development financing began to change, with a greater emphasis on transportation than before.

Notably, among the largest recipients of Chinese development financing commitments only Angola ranks among the ten countries that owe the most debt to China as a percentage of GDP. China is rarely a foreign country's lone creditor. Countries like Pakistan borrow just as much if not more from the World Bank as they do from China's development banks.

From 2008 to 2021, the CDB and CHEXIM made $498 billion in lending commitments, compared to $601 billion by the World Bank, according to the Global Development Program. World Bank lending has since risen again in response to the COVID pandemic as Chinese development banks take a back seat, largely limiting loans to budgetary support for distressed partner countries like Pakistan.

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