China’s expanding global loan portfolio gives Beijing extraordinary economic and strategic leverage as it competes with the United States on technology, global supply chains, and critical rare minerals. Accurately determining its overseas investments (grants, loans, other financial instruments) however has long been a guessing game. Such Chinese data can’t be easily found in traditional international reporting systems like the Organisation for Economic Co-operation and Development (OECD) and the International Aid Transparency Initiative (IATI).  Chinese data can vary by source, much of which is hard to decipher as investments are displayed in the aggregate rather than by individual projects. Gaps in data and Chinese-language only publications present other obstacles to transparency. 

Chinese investment pivots, along with fresh funding directions, can thus be easily overlooked, exaggerated or underestimated. This is precisely why AidData’s new comprehensive investment report compiled by the “data sleuths” at William and Mary College, is a breath of fresh air for those stuck in China’s data purgatory. In my review of this report covering an exhaustive 30,000 projects spanning 217 countries over 24 years, I found four surprising, almost seismic, shifts in Chinese investments that could accelerate China’s reshaping of the global landscape for years to come. 

Adios to BRI in the Global South?

For the last decade, China’s Belt and Road Initiative (BRI) has circumnavigated the globe, building massive, dazzling infrastructure in 150 countries such as the China-Laos Railway, the Jakarta-Bandung high speed train, and the Mombasa-Nairobi Standard Gauge Railway. Like bamboo sprouts after the rain, Chinese loans and investment have also led to the completion of ports, hundreds of mining projects and countless fossil fuel and clean energy plants in developing countries. By some estimates, BRI projects have impacted two-thirds of the world’s population and 40% of global GDP by boosting economic growth and transforming entire communities. Chinese press releases boast BRI’s investments have lifted 40 million people out of poverty since 2013. 

And yet, data from the current AidData report shows China is no longer focused on energy and transportation infrastructure. In developed and developing countries, Beijing now spends, or lends, a larger amount of money in technology and banking, reducing total “hard” infrastructure expenditures from a high of 75% to around 25%.  

Another change is a dramatic lending shift to more developed countries. AidData uncovered that low- and middle-income countries accounted for 88% of Beijing ‘s lending in 2000 and plunged to a record low of just 24% in 2023. Only 10 of the top 20 recipients of official loans are low- or middle-income countries; six are high-income countries with the United States, surprisingly, leading the pack with $200 billion in loans. The heyday of massive BRI infrastructure projects in low- and middle-income countries is seemingly in the rear view mirror.

Shift Away from Fossil Fuels to Greener Energy

According to AidData, Beijing has sharply reduced overseas loans for coal, oil and natural gas power plants over the last 10 years while simultaneously increasing financing for hydroelectric, solar, wind and geothermal energy projects. This appears consistent with China’s UN pledge to increase “green” loans for low-carbon energy production at home and abroad. Chinese leaders also announced in New York, a push to strengthen Beijing’s environmental governance systems overseas. 

AidData reveals that between 2021 and 2023 alone, $12.7 billion was loaned by Chinese State-owned banks to support renewal energy projects in over 33 countries including major hydropower plants in Indonesia, Madagascar, Bangladesh, and Bosnia and Herzegovina, along with solar power plants in Turkey and Burkina Faso, and wind farms in Australia, Hungary, the UK, Netherlands and, the first-ever commercial-scale offshore wind farm in US called Vinyard Wind1, off the coast of Massachusetts. According to AidData, China’s earlier overwhelming loan support for non-renewable energy production is slowly giving way to an era of more green financing precisely when the United States has sharply curtailed green financing by canceling billions in clean energy funds and withdrawing from international finance groups. But of course, China’s upswing in green financing is always subject to Beijing’s geopolitical and economic whims.

Lending Barometer Breaking New Heights 

According to AidData, earlier loan estimates often missed vital information from the full range of Chinese lending institutions (e.g., government agencies, state-owned banks and companies, special purpose vehicles, and joint ventures) and their complex and often opaque credit instruments such as, syndicated loans, balance of payments loans, and credit swaps. 

AidData also introduced a new measure to determine whether a loan qualifies as a public and publicly guaranteed debt or not. When these loan sources and financial instruments are factored in, AidData data reveals that Beijing’s current global lending is at an all-time record-breaking amount “in excess of $2 trillion,” an amount significantly larger (as much as twofold in some cases) than some earlier estimates. China trackers at AidData also point out that Beijing continues to devise new mechanisms that can obscure its real loan activity and become “invisible” in standard international reporting systems.

What is not in dispute is that China is the top lender to developed and developing countries, exceeding those of the World Bank and International Monetary Fund. AidData claims China’s overseas lending has ranged roughly between $500 billion and $1 trillion since 2005, while the China Global Tracker estimates Chinese worldwide loans since 2005 at $1.5 trillion. There are still considerable debates and controversies among China scholars, international financial institutions, and other serious “number crunchers” as to the accurate lending amount by Beijing. 

Loans and Beijing’s Rising Geopolitical Influence

Most countries are on the receiving end of Beijing’s “loan octopus.” AidData shows that 179 out of 217 countries and territories received at least one loan between 2000 and 2023 from a state-owned Beijing creditor. Just as an earlier report warned about China’s expansive activities to promote its geopolitical agenda via information manipulation, the same can be said about its geopolitical agenda to advance China’s national and strategic interest via its loan apparatus. 

AidData highlights the various ways that loans originating from China, or through offshore shell entities, international bank syndicates, or other exotic lending arrangements, enabled Chinese companies to acquire sensitive strategic technologies such as advanced AI applications, quantum computing, and robotics from the Global North using a combination of legal, quasi-legal, and illegal methods. For example in 2021, the largest UK-based microchip producer was bought by the Chinese-owned company Nexperia for $76 million. That acquisition had initially been given the green light by UK authorities. A subsequent government review and resulting tougher UK legislation found that the sale posed a serious national security risk forcing Nexperia to sell almost all of its shares. 

Chinese loans are everywhere and the new data released by AidData confirm that Beijing uses its loans to better position itself in strategic sectors, including its stranglehold on critical minerals and potential choke on vital supply chains, to leverage and expand its geopolitical influence. The often opaque nature of Chinese loans, unlike more traditional ones, can place fewer constraints on recipient government’s policies, which in turn, can boost Beijing’s influence, especially in autocratic countries.

Summing Up: China’s Seismic New Loan Direction and Its Implications

For the last decade, China’s BRI has led to the completion of numerous high-stakes port facilities, hundreds of mining projects, and countless fossil fuel and energy plants in the developing world. That ship has sailed. In developed and developing countries, Beijing now loans more money for technology and banking sectors than for traditional BRI infrastructure projects. 

Another seismic shift reveals that China is sharply reducing its cross-border loans for coal, oil and natural gas fired-plants while increasing “green financing” for hydroelectric, solar, wind and geothermal energy projects. Beijing’s overseas loans are at an all-time high in excess of $2 trillion but that may be a serious under-estimation as China devises new ways to obscure its ever-growing overseas loan portfolio. 

Chinese loans are now better targeted at strategic sectors from rare earth minerals to vital supply chains essential to dominate global commerce. The new direction of Beijing’s loans gives China increasingly greater economic leverage over the United States and chips away at long-standing U.S. technological dominance. Left unchecked, the new Beijing “loan regime” could irreparably disrupt global financial power dynamics in China’s favor.