According to German Chancellor Olaf Scholz, China’s years-long lending binge in weaker nations, notably in Africa, poses a “severe threat” that might push the globe into the next financial catastrophe.
“There is a very real risk that the next major debt crisis in the global south will be caused by loans that China has given throughout the world but doesn’t have a complete picture of because there are so many parties involved,” Scholz said.
“This would then plunge both China and the global south into a severe economic and financial catastrophe, which would not, to put it gently, leave the rest of the globe unscathed.” As a result, this is a major worry.”
A fellow speaker claimed Europe had stood by while Chinese money built African roads and colleges, enhancing Beijing’s weight on the continent, during an on-stage discussion at Germany’s Catholic Day in Stuttgart.
China has long been accused of leading low-income countries into debt traps by providing large, expensive loans.
Beijing denies the accusation, claiming that its loans are intended to help poor people.
Scholz said he was pressing for China to join the Paris Club of Creditors, which has agreed on a set of rules for dealing with troubled nations.
“Bringing China in as a country that is lending a lot in new ways is one of our very, very important aspirations,” he added.
He also mentioned the European Union’s Global Gateway effort, which is intended in part at opposing China’s influence.
The EU intends to invest more than 150 billion euros in Africa under the plan, with a focus on renewable energy, transportation, vaccine manufacturing, and education.
The ambitious plan is largely seen as a counter-proposal to China’s massive Belt and Road development initiative.