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G7 Finance Ministers Openly Frustrated With China on Debt Relief

Debt relief for developing countries is emerging as the latest front in China’s rapidly escalating confrontation with the U.S, European countries, and Japan. Finance ministers from many of those countries, representing the Group of 7 (G7), met on Friday to discuss debt relief initiatives for the world’s poorest countries, including many in Africa.

In a sharply-worded joint statement issued after the meeting, the finance ministers singled out China for failing to do more to support the Group of 20’s Debt Service Suspension Initiative and for Beijing’s lack of transparency in its debt relief talks.

Although the statement did not mention China by name, the finance ministers used thinly veiled language to make clear they were referring to Beijing:

  • DEBT CLASSIFICATION: “We strongly regret the decision by some countries to classify large state-owned, government-controlled financial institutions as commercial lenders and not as official bilateral creditors, without providing comparable treatment nor transparency, thus significantly reducing the magnitude of the initiative and the benefits of the DSSI for developing countries.”
  • TRANSPARENCY: “We call on non-Paris Club lenders to commit to full and transparent implementation of the DSSI through all government entities going forward.”

Chinese stakeholders, have repeatedly said they are committed to the DSSI process but don’t provide any details. For example, in a June 2020 speech to African leaders, President Xi Jinping said “we encourage Chinese financial institutions to respond to the G20’s DSSI and to hold friendly consultations with African countries.”

It’s not clear what exactly “encourage” means and what was achieved from those “friendly consultations” as there’s been little-to-no public comment from the Chinese about specific updates on their DSSI-related debt relief initiatives.

What Critics are Saying About China’s Approach to the G20’s Debt Relief Initiative:

  • JAPANESE FINANCE MINISTER TARO ASO: “China’s participation in DSSI is totally insufficient. I told (the) G7 that we must apply further pressure on China, that DSSI needs to be extended beyond this year-end deadline, and that we must ensure burdens will be shared fairly by all creditors.” (REUTERS)
  • ERIC LECOMPTE: “Pressure is mounting on China. They’re being very specific here. All Chinese government entities should stop taking debt payments from poor countries.” (REUTERS)

One reason that officials from the World Bank, the IMF and now the G7 have become increasingly open in their criticism of China is Beijing’s outsized role in the global development finance sector. China, according to World Bank statistics, is owed almost 60% all 2020 debt repayments from the world’s poorest countries.

Chinese media, not surprisingly, seemingly avoided the G7 finance ministers meeting. The only report published by state-controlled media outlets was an AFP story that focused on the G7’s call for more private sector participation in the debt relief process. Xinhua did not file a story.

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