Chinese Lenders Are Reluctant To Spend More On CEPC

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Chinese Lenders Are Reluctant To Spend More On CEPC

August 28, 2020, By Suvendu Mahato,  Seefullform.


A few weeks back Saudi Arabia force Pakistan to repay One Billion Dollar. Islamabad did not have the cash. So it turns to Beijing, China bailed out Pakistan. Now, what if the Chinese too, besides to turn off the cash to Pakistan. This is not a hypothetical question, this is happening as we speak. If the Pakistani criticise to believe Chinese banks and financial institution do not want to fund the China Pakistan Economic Corridor, the CPEC any more.

Pakistan needs this money to finish this project and now its chief sponsor the Chinese bank may not want to fund them. Reports say they are not happy with the quite and quite current state of affairs. Chinese banks and institution are showing low or no interested in financing CEPC now.  Pakistan quite between rocketing and a hard place, its foreign minister Shah Md. Quereshi is said to have raise to issue during his recent visit to China. 

Now here is something you should know. China uses its ban routinely to Belt and Road Project. The BR Projects. Chinas biggest and most powerful banks are run by the state. Money is usually not a problem for china. So why are these Chinese financer looking away from Pakistan because it’s a loss-making enterprise. The last report came last year.

This is from the Wall Street Journal. “Instead, Pakistan is now enmeshed in an economic crisis, putting the breaks on a new building, with less than half of $62 billion of Chinese projects carried out. The Chinese infrastructure, all built by Chinese state-owned companies, required the Pakistani government to guarantee repayments to Beijing. “ 

The fears of this Chinese lender are legitimate. You see you only extend a loan to those who can repay and Pakistan is no condition to repay. Let me give some figures.

 


In July this year, Pakistan received $ 1.8 Billion in Gross Foreign Loans. $1.8  Billion a huge amount. This is a jump of 263% compared to the same month last year. In the last fiscal year, Pakistan received $13 Billion in foreign loans. A little more than $10 Billion was utilized to repay maturing loans. It takes more loans to repay previous loans. Pakistan is a country that surviving from loans it borrows one source and repay to another lender. By now any bank in Pakistan could have declared its non-performing asset, but China has not. Until now that is.

Now Chinese banks want nothing to do with Pakistan. What does this indicate? It shows that Chinese banks are to have short of cash. I give some figures. Chinese biggest banks have faced a capital shortage. It face $940 Billion Capital shortage by 2024. Compare to the last year it had a total shortage of 2.25 trillion yuan ($323 Billion).  


China’s four largest lenders are facing a funding gap. These are the industrial and Commercial Bank of China. The Bank of China,  the China Construction Bank And the Agricultural Bank of China. The four most important bank in China. Not for the China but for the global economy. Because these banks fail, the fall could trigger a financial crisis. According to a report these four banks have a financial shortage of $323 billion last year. And this shortage can grow up  $940 Billion by 2024. It's not just the lenders are suffering but combined earnings of more than one thousand commercial Chinese banks have slumped by the lot. 

1000 Banks down by 24%. The reason is the same Bad loans. China Big State-owned banks are the hardest hit. Beijing has used these banks to salaries the economy to Cheques by heft. But these coffers are not bottomless.

Chinese Banks and Chinese Lender cannot afford any more bad debts. Pakistan should look for new lender and China should be finding ways to get out its own debt trap.

 

Is Pakistan is able to pay Chinese Loan? What you thought. Pass your comment in the comment section. Thank you for reading.


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