Study Suggests China’s Global Loan Footprint Far Larger Than Previously Believed
A sweeping investigation into the scale of Beijing’s overseas lending has found that China has amassed a global lending portfolio worth more than US$2-trillion – a figure at least twice what earlier estimates suggested.
The totals uncovered in the study by the U.S.-based AidData, which draws on more than two decades of dealmaking across 30,000 projects, offer the most complete picture to date of China’s overseas lending and point to a system far larger and more complex than official reporting has suggested.
A significant and growing share of China’s lending since 2000 has gone to high-income and upper-middle-income countries, supporting thousands of projects across North America, Europe and the Asia-Pacific in sectors such as energy, transportation and advanced technology.
The findings from the international-development finance lab, based at the College of William & Mary in Virginia, upend the prevailing view that China’s overseas lending is concentrated in lower-income countries participating in its “Belt and Road” infrastructure push.
In Canada, China has built a US$21.3-billion portfolio of official-sector finance – loans channelled through policy banks, state-owned enterprises and other government-linked institutions. The total excludes purely private corporate investment by Chinese firms.
Of the acquisition financing linked to those state-directed flows since 2000, 95.7 per cent has targeted sectors that Canada and other OECD countries often regard as “sensitive” – areas tied to national security, critical minerals and other strategic assets. Within those deals, the largest share – 71 per cent – went to mineral resources, with the balance concentrated in energy and industrial production.
The trend accelerated during a surge of dealmaking in the 2010s, led by Chinese state-linked firms through deals such as Sinopec’s investment in Daylight Energy, CNOOC’s takeover of Nexen and financing tied to Rio Tinto’s acquisition of Alcan, as well as dozens of smaller transactions across mining, energy and industrial production.
The investments in Canada mirror a global shift in Beijing’s overseas activity, as China channels increasing amounts of capital into advanced technology, transportation, energy and critical minerals in wealthier economies.
The researchers reconstructed the portfolio by tracking 30,000 projects linked to more than 2,000 Chinese donors, revealing a footprint that was “much, much larger than anyone previously understood,” co-author Brooke Escobar said in an interview ahead of the report’s publication on Tuesday.
The United States is the single largest recipient, with more than US$200-billion flowing into about 2,500 projects – followed by the EU’s 27 member states, which together have borrowed US$161-billion. Other major destinations include Britain, Germany, France, Italy, Portugal and the Netherlands.
“There are very few places in the world where Chinese lending operations are not taking place,” Ms. Escobar said. The report notes the US$2.2-trillion amount is four times larger than some estimates.
China’s use of opaque financial structures and offshore channels has made its portfolio increasingly difficult to track. “What we actually find is kind of an offshoring effect on both sides,” Ms. Escobar said. Loans booked through foreign branches and routed through shell companies “make it so that these types of transactions essentially become invisible.”
Beijing is shifting away from reputation-building aid and toward a harder-edged model of global finance. The government “is focused on cementing its position as the international creditor of first – and last – resort that no one can afford to alienate or antagonize,” the authors wrote. “Beijing is not seeking to burnish its reputation as a global do-gooder.”
The country is increasing its use of collateralized lending, including arrangements where repayment is guaranteed by revenue streams unrelated to the projects being financed. Ms. Escobar said these structures – such as infrastructure loans backed by oil income in Iraq – have become more common in energy and mineral-rich countries and strengthen Beijing’s leverage over borrowers.
A “fundamental re-orientation” away from economic development and social welfare in recipient countries has prompted Western governments to rethink how they support their own industries overseas. G7 countries have begun cutting aid budgets, expanding investment in national security and asserting greater control over strategic assets, the report found.
Measures such as the Minerals Security Partnership, formed in 2022 by a group of G7 members and the European Union, direct financing into foreign mining and processing projects to reduce reliance on China for minerals used in advanced manufacturing and defence technologies.
China’s acquisition activity appears to be accelerating in those strategic sectors. Beijing is securing approvals for roughly 80 per cent of overseas takeovers in “sensitive” areas, a rate the authors say is rising as the economic superpower concentrates on jurisdictions with weaker screening regimes and offshore structures that attract less regulatory attention.
The new figures show that China remained the world’s largest official creditor in 2023, lending about US$140-billion to public- and private-sector borrowers worldwide – more than twice that of the U.S. and nearly US$50-billion higher than the World Bank, the largest multilateral source of development finance.
Beijing’s expansion is also bringing a flood of cheaper money – a dynamic that has influenced bidding in sectors where Canada is active, including critical minerals.
“Chinese companies can bid more easily because they borrow at far below market rates,” Ms. Escobar said.
In October, Chinese President Xi Jinping told an assembly of world leaders at the Belt and Road Forum in Beijing that his flagship policy, launched in 2013, had “boosted the flow of goods, capital, technology and human resources into the countries involved.”
This article was first reported by The Globe and Mail
