China Damns Yellen's Debt Trap Criticism as 'Unreasonable'

China has shot back at remarks by US Treasury Secretary Janet Yellen, who said Beijing’s lending activities leave developing countries “trapped in debt.”

A Foreign Ministry spokesperson described the comments by Yellen as “irresponsible” and “unreasonable”.

Yellen said on Wednesday she was concerned by some of China’s activities globally, particularly its lending to developing countries. She told US lawmakers in a hearing that Washington was working hard to counter China’s influence in international institutions and in lending to developing nations.

China has lent hundreds of billions of dollars to build infrastructure in developing countries, but lending has tailed off since 2016 as many projects have failed to pay the expected financial dividends.

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“I am very, very concerned about some of the activities that China engages in globally, engaging in countries in ways that leave them trapped in debt and don’t promote economic development,” Yellen said on Wednesday.

In response, the Chinese government on Thursday said the debt problems of the world were made worse by the United States due to what Beijing called an “unprecedented rate” of interest rate hikes by the US Federal Reserve.

“We do not accept unreasonable accusations from the United States,” Chinese Foreign Ministry spokesperson Mao Ning said in a news briefing on Thursday.

“The United States should take practical actions to help developing countries, instead of pointing fingers at other countries and making irresponsible remarks,” Mao added.

China says it has always followed international rules and carried out investment and financing cooperation with developing countries with openness and transparency.

However, experts who have researched China’s lending patterns said their loans are often opaque and shrouded in secrecy. Critics say they have amplified economic crises in countries such as Sri Lanka, Laos, Pakistan and others in Africa.

China spent $240 billion bailing out 22 developing countries between 2008 and 2021, with the amount soaring in recent years as more have struggled to repay loans spent building “Belt and Road” infrastructure, a recently published study showed.

China is negotiating debt restructurings with countries including Zambia, Ghana and Sri Lanka and has been criticised for holding up the processes. In response, it has called on the World Bank and International Monetary Fund to also offer debt relief.

Loan to Pakistan gets rolled over

Meanwhile, in related news, Pakistan Finance Minister Ishaq Dar said on Friday that China had rolled over a $2-billion loan that matured last week, providing relief during the South Asian nation’s acute balance of payment crisis.

Locking in a rollover had been critical for Pakistan, where reserves have dipped to just four weeks’ worth of imports and talks over an IMF bailout tranche of $1.1-billion had hit a stalemate.

“I am happy to confirm that this had been rolled over on March 23,” Dar told parliament, referring to the maturity date. He said all concerned documentation had been completed.

Dar’s comments were the first official announcement of the rollover after the loan matured. Dar did not give the new maturity date or other terms of the arrangement.

A top finance ministry official said on Wednesday that a formal confirmation of the refinancing would be made after the process was completed.

Islamabad has been negotiating with the IMF since early February for the release of $1.1 billion from a $6.5 billion bailout package agreed in 2019.

One of the IMF’s conditions for the release of the tranche is assurance of external financing to fund Pakistan’s balance of payments.

Longtime ally Beijing is the only help Islamabad has got so far, with refinancing of $1.8 billion credited last month to Pakistan’s central bank.