Loading ...HONG KONG – The threat of Venezuela defaulting on Chinese debt is putting pressure on Beijing to reassess how easily it doles out money to commodity-dependent nations, especially those in Africa. As low oil prices ravage Venezuela’s economy and embattled leader Nicolas Maduro seeks better terms on Chinese loans, China is paying greater attention to things like fiscal stability and political risk in overseas lending. Increasing such scrutiny could complicate President Xi Jinping’s pledge to spread $60-billion in aid across Africa over the next three years, much of it preferential loans and state-backed investments in countries heavily reliant on resource exports and prone to instability.
“What we learned from the Venezuelan case is that China should be more cautious and sophisticated about its overseas lending and investment,” said Xue Li, director of international strategy at the state-run Chinese Academy of Social Sciences’s Institute of World Economics and Politics. “Compared to Latin America, Africa holds greater strategic significance for China and there’d be more at stake if things go wrong.” More than $86-billion of loans sent to sub-Saharan Africa between 2000 and 2014 helped China build enormous diplomatic clout and secure raw materials to fuel its economic boom. The Venezuelan collapse has underscored the dangers to that financing model, even as Xi pushes to accelerate Chinese investment around the globe.