China labels US debt trap accusation 'irresponsible, unreasonable’

China has called remarks by US Treasury Secretary Janet Yellen "irresponsible" and "unreasonable" after Yellen said Beijing's lending activities leave developing countries "trapped in debt."

Janet Yellen on Wednesday said she was concerned by some of China's activities globally, particularly its lending to developing countries. She told US lawmakers in a hearing that Washington was working hard to counter China's influence in international institutions and in lending to developing nations.

China has lent hundreds of billions of dollars to build infrastructure in developing countries, but lending has tailed off since 2016 as many projects have failed to pay the expected financial dividends.

"I am very, very concerned about some of the activities that China engages in globally, engaging in countries in ways that leave them trapped in debt and don't promote economic development," Yellen said on Wednesday.

In response, the Chinese government on Thursday said the debt problems of the world were made worse by the United States due to what Beijing called an "unprecedented rate" of interest rate hikes by the US Federal Reserve. "We do not accept unreasonable accusations from the United States," Chinese Foreign Ministry spokesperson Mao Ning said in a news briefing.

"The United States should take practical actions to help developing countries, instead of pointing fingers at other countries and making irresponsible remarks," Mao added.

China says it has always followed international rules and carried out investment and financing cooperation with developing countries with openness and transparency.

China spent $240 billion bailing out 22 developing countries between 2008 and 2021, with the amount soaring in recent years as more have struggled to repay loans spent building "Belt and Road" infrastructure, a recently published study showed.

China is negotiating debt restructurings with countries including Zambia, Ghana and Sri Lanka and has been criticised for holding up the processes. In response, it has called on the World Bank and International Monetary Fund to also offer debt relief.

Reuters: US Treasury Secretary Janet Yellen said on Wednesday that the US is working hard to counter China’s influence in international institutions and in lending to developing countries, and that by lending to developing countries, China leaves them trapped in debt. What is your response?

Mao Ning: We reject the unjustified accusation from the US. China has always carried out investment and financing cooperation with developing countries based on international rules and the principle of openness and transparency. We never attach any political strings, or seek any selfish political interests. We have been helping developing countries relieve debt burdens, and made the biggest contribution to implementing the G20 Debt Service Suspension Initiative. 

World Bank statistics show that multilateral financial institutions and commercial creditors, accounting for more than 80% of the sovereign debt of developing countries, are the biggest source of stress on developing countries in terms of debt payment. Since last year, the US has resorted to unprecedented massive interest rate hikes, making the debt problems of certain countries even worse. The US needs to take concrete steps to help developing countries, rather than point fingers at others.