China’s Belt and Road at crossroads as more loans turn sour

  • China’s trade with Belt and Road participants grew 76% from 2013 to 2022, outpacing the 51% increase in China’s overall trade, according to its customs agency.
  • China’s trade surplus with Belt and Road countries has grown as well. The figure totaled $197.9 billion for the first seven months of 2023 and is on track to a new full-year high. This surplus, which accounts for around 40% of China’s total, helped the country rely less on trade with the U.S. amid growing bilateral tensions.
  • But Belt and Road countries face mounting trade deficits, while hopes for increased access to the Chinese market fade. Italy, which in 2019 became the only member of the Group of Seven to join the initiative, saw its trade deficit with China double in three years through 2022.
  • COVID-19 was a key trigger for China to reevaluate its approach. The pandemic dealt a blow to emerging economies, leading to a surge in debt renegotiations and write-offs. A total of $76.8 billion in loans involving Chinese lenders have essentially gone bad between 2020 and 2022, according to U.S.-based Rhodium Group — 4.5 times as much as between 2017 and 2019.

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