China has poured billions of dollars into government infrastructure projects around the world that otherwise might have sunk for lack of financing. But repercussions could leave nations crumbling, according to a new report.
While hotels around the Carribbean were struggling to stay afloat, China bankrolled the biggest resort under construction in the Bahamas – a massive hotel, condominium and casino complex – and went against financial instincts and the conventional credit ratings.
Over the past five years, China has loaned Venezuela more than $35 million. Venezuela’s Oil and Mining Minister Rafael Ramirez says China has loaned his country $36 billion since 2008. Others estimate the figure at $46.5 million.
Venezuelan leader Hugo Chavez last year highlighted another $4 billion in Chinese loans, a part of a wave of funds that has translated into new railways, utilities and other projects.
The loans have added to Venezuela’s $95.7 billion in public foreign debt as of mid-2012.
Chinese money is breathing life into infrastructure projects not only to Venezuela but also to Ecuador and Argentina as well as tiny islands in the South Pacific, raising concerns that it could further drag these financially shaky countries, The Associated Press reports.
But these deals are driven by what China sees would benefit them, such as repayment in oil and natural gas it needs to sustain its growth for decades to come.
“The Chinese play by other rules,” said Kevin Gallagher, an international relations professor at Boston University. “We’ll give you financing with no conditions, and we’ll finance things the International Monetary Fund won’t fund, things others won’t fund anymore, like big infrastructure projects. It allows countries to shop around, which has good and bad sides”.